Brief Overview
- In January 2019, Amazon picked up a 49% stake in Kishore Biyani’s Future Group’s – Future Coupons for $194 Million.
- In August 2020, Future Group’s listed entities including Future Retail, Future Lifestyle and Future Consumer merged into Future Enterprises Limited (FEL). Reliance Retail, a subsidiary of the umbrella Reliance Industries Limited (RIL) group then entered an agreement to buy Future Enterprises. As a part of the deal, Future Retail would sell its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory retail as well as wholesale units to Reliance Retail.
- As for Future Retail, the cause of action arose when Amazon raised concern that Future Group has violated a non-compete clause and a right-of-first-refusal pact. The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.
- The outcome of the dispute embroiling Future, Reliance and Amazon is shaping India’s retail landscape, especially in deciding who will have an upper hand in the groceries market expected to be worth around $740 billion a year by 2024.
Consequences
Given that Future Retail failed to stop Amazon from presenting itself to the various government bodies and regulators, the e-commerce giant will be allowed to make its case, mainly on the basis of the arbitration award. However, it is also noteworthy that the anti-trust regulator, Competition Commission of India, approved the sale of Future Group’s wholesale, retail, warehousing and logistics business to Reliance Retail last month.
● FRL Cites Potential Risk-The solvency of over 6,000 SMEs and their employees is at stake. Approximately $408Million of public money in the form of bank loans and debentures issued by FRL and its group companies is also at risk.
● SEBI and India’s stock exchanges could still reject or take more time in approving the deal, which is critical for the survival of Future Retail, whose more than 1,700 outlets were hit hard by the COVID-19 pandemic.
● Future Retail has warned that failure to close the deal could lead to the company’s liquidation and job losses for more than 29,000 employees.
