In India’s retail, a battle of the billionaires
Amazon.com Inc’s chief executive Jeff Bezos, the world’s wealthiest man, is determined to retain his company’s pre-eminence in India’s retail market, estimated to reach $1.3 trillion by 2025, amid a surge in online shopping, and stave off an equally determined challenge from Mukesh Ambani, Asia’s richest and chairman of Reliance Industries Ltd, which runs the country’s largest offline retail chain.
The battle for dominance in one of the fastest-growing major retail markets is being fought on the ground in India and the courts in Singapore and New Delhi.
The current bone of contention is the assets of Future Retail Ltd, which runs the Big Bazaar supermarket chain. Ambani’s Reliance Industries agreed in August to buy the indebted Future Group’s assets for ₹24,713 crore, just about a year after Amazon had purchased an indirect stake in Future Retail. Amazon has opposed the sale, claiming it violates Future Group’s investment agreement with it.
The outcome of the dispute is likely to shape India’s retail market.
What triggered the feud between Ambani and Bezos?
Amazon purchased 49% in Future Coupons Ltd, an unlisted firm of the Future Group, giving it an indirect stake in Future Retail. The agreement also gave Amazon the right to buy a bigger stake in the Future Group flagship company once India lifts restrictions on foreign investments in brick-and-mortar retailers. However, Future Group ran into a severe liquidity crisis after the nationwide lockdown was announced in March.
Kishore Biyani-led Future Group had little option but to sell its assets to tide over the crisis. Biyani chose to sell the group’s assets to Reliance Industries, angering Amazon. The US e-commerce giant claimed its investment agreement with the Future Group specifically barred such a deal.
What’s at stake?
Amazon.com and Reliance Industries are fighting it out for supremacy in India’s retail market, where online sales are surging as customers from small towns and cities are beginning to purchase from e-commerce platforms for the first time.
Acquiring Future’s network of retail, wholesale, logistics, and warehousing assets will provide Reliance Retail, which is already the biggest offline retailer in the country, with the firepower to take on Amazon and Flipkart in the online retail market.
What is the status of the legal dispute?
Amazon initiated arbitration proceedings before the Singapore International Arbitration Centre against Kishore Biyani, Future Coupons, and Future Retail in October and got emergency relief to block the deal with Reliance Industries.
Future Retail termed the Singapore ruling as legally unenforceable in India and petitioned the Delhi High Court to stop Amazon from interfering in the deal. Reliance said it intended to purchase Future Retail’s assets without any delay, notwithstanding the arbitration court order.
On Tuesday, the high court permitted Future Retail to proceed with the sale of its assets to Reliance Industries but left it to the regulators to decide the fate of the deal. It, however, declined to restrain Amazon from approaching appropriate forums to oppose the transaction. Both parties in the dispute can approach a higher court.
What are the next steps in the transaction?
The ruling shifts the spotlight to the Securities and Exchange Board of India and the ministry of corporate affairs, where Amazon is challenging the deal. The Competition Commission of India cleared the transaction in November.
What happens if the deal collapses?
Future Retail may face possible bankruptcy. It has defaulted on payments earlier this year and has posted a string of losses. A quick resolution of the dispute is critical for the store chain and its founder Biyani.