Reliance Retail — India’s largest retail chain — buying a majority stake in the country’s second biggest retail giant-Future Group was red flags all along in any case. Now though, it has pissed off the biggest global ecommerce player, Amazon. The US etailer has served a legal notice to the Kishore Bhayani-backed firm for breaching its existing contract by getting into a deal with Reliance.
Some sources told ET Now, “The legal notice to Future Group is for not meeting contractual obligations. Amazon got certain contractual rights when it invested in the Future Group. This includes a right of first refusal and a non-compete like pact.”
In the legal notice, Amazon has mentioned that Future breached the code of its contract that had “a restricted list” of companies it was not allowed to make a deal with.
In August, Reliance had announced that its Retail business is acquiring a majority stake in Future Group for $3.4 billion. According to the deal, Reliance Retail Ventures (RRVL) would take over Future’s retail, wholesale, logistics and warehousing businesses. Buying a majority stake in the second-largest retail business in India would further strengthen RRVL’s position as the largest retail business in the country.
The problem is, back in August 2019, Amazon had acquired a 49% stake in the Future Group promoter, Future Coupons for around Rs 1500 crores. This means that any business that the parent company Future Group does affects Amazon indirectly.
The source added, “When Amazon invested in Future Group, there was a non-compete like an arrangement. And just eight months after signing with Amazon, Future has gone and announced a deal with a competitor.”
ET Now report says that the deal between Amazon and Future Coupons includes a grievance redressal mechanism with interference from the court and arbitration. This means if the situation worsens, the court could interfere with mediation.
This is definitely bad news for Reliance which is making the best of efforts to take control over the Indian retail market. The company raised billions of dollars in the past one month, and is still in the middle of a round that can end up reeling in tens of billions for the retail giant.
