Now Amazon.com Inc. It has also been added to the list of companies that Mukesh Ambani has defeated in the juggernaut. Not only have they stunned the US giant in its battle to dominate India’s retail market segment, but they now have all the cards in their $3.4 billion battle to buy out the retailer.
Reliance’s strategy
In late February, Ambani’s Reliance Industries Ltd. quietly started hiring employees and signed lease agreements for hundreds of stores run by Future Retail Ltd and Future Lifestyle Fashion Ltd. Amazon even tried to block formal acquisitions through litigation and arbitration from India and Singapore. Ambani’s move forced Amazon to settle and made Future’s investors and lenders wary of asset-marketing.
Future surprised by Reliance’s move
“We did not expect that without discussing the matter with us, Reliance Group would take such drastic action,” said Chandra Prakash Toshniwal, Chief Financial Officer, Future Retail, in a letter dated March 2 to Reliance Retail’s units. Confirm that there will be no further deduction in payment, he said. According to another letter dated March 5 (Bloomberg has copies of both letters sent by Future Lifestyle)—Future Lifestyle expressed “concern and shock” and requested Reliance not to take action that is “by lenders”. Seriously, those who have charge of the company’s current and fixed assets. Banks may cut future credit lines, which are already left with the cash-strapped retailer, the letter said.
Matter complicated after Amazon’s objection
The Kishore Biyani-led Future Group became embroiled in a tussle between the two large corporations when Amazon objected to Reliance’s August 2020 offer to buy Future Retail’s stores and warehouses for 247.1 billion rupees ($3.4 billion). The US e-commerce giant said the deal violated a 2019 agreement with another Future Group firm as it liquidated Future Retail, which has defaulted on debt obligations and faces bankruptcy risk. Before the pandemic hit, Future Group was India’s largest retail chain. It then became a point of contention for the world’s two richest – Ambanis and Amazon’s Jeff Bezos – as they both seek control of the consumer market.
Reliance in strong position after this move
Representatives for Reliance, Amazon and Future Group did not immediately respond to emails seeking comment on the letters. The fate of Future Group investors and lenders, including Blackstone Inc and L Catterton, now hangs in the balance as Reliance, Future and Amazon can settle out of court by March 15 and have to report the progress of the case to the Supreme Court of India .
According to Nirmal Gangwal, Mumbai-based founder of financial advisory firm Brescon & Allied Partners LLP, Reliance’s strategic win is its “master key” that gives it the strongest position at the negotiating table. Amazon is another company that sees Reliance’s dominance as Reliance is dominating in petrochemicals, crude oil refining, consumer retail, telecom, digital services green energy.
silent takeover
Amazon called for the case to be dropped after local media reported silent acquisitions of around 200 Reliance stores and the signing of lease agreements for Future’s stores and sending job offers to 30,000 Future Group employees. Amazon’s distrust came to the fore during a court hearing last week.
American e-tailer’s lawyer Gopal Subramaniam said that Future Group told him that it would take six months or more to complete the deal with Reliance. “It’s hardly been 48 hours since this happened and people are encroaching on the shops,” he said. Due to declining cash flow and operations, the two Futures firms owe over Rs 300 billion in total debt. A person close to the matter said that Reliance would honor the definitive agreement that they had signed in the past.