December 4, 2023

Food Bazaar

Get In My Food Bazaar

What does the Future deal collapse mean for Amazon and Reliance?

20 months after announcing that it would buy Future Group’s retail, wholesale and logistics business for Rs 24,713 crore, Mukesh Ambani’s Reliance Industries on Sunday backed out of it. Reliance said the deal cannot be implemented after the secured creditors of Future Group’s flagship firm Future Retail, which operates Big Bazaar and Easyday stores, voted against it. Once India’s second-largest retailer with more than 1,500 stores, Future Retail along with other group companies are now expected to go to the National Company Law Tribunal as lenders seek to recover their dues of almost Rs 29,000 crore under the Insolvency and Bankruptcy Code. The deal has been at the centre of a lengthy legal battle between Amazon and Reliance. Amazon has challenged the takeover in various forums and obtained legal injunctions that stalled the deal. In August 2019, Amazon had invested about Rs 1,500 crore for a 49% stake in Future Retail’s promoter entity Future Coupons, indirectly gaining a 4.8% stake in the former. Amazon says its 2019 deal came with an agreement that bars Future Group from selling its retail assets to Reliance without its permission. Amazon was looking to expand its foothold in India’s vast retail market. In 2018, Amazon and private equity firm Samara bought food and grocery retail chain More from Aditya Birla Group. When it comes to tapping India’s retail consumer base, companies like Amazon face more hurdles. Foreign investment in offline multi-brand retail is tightly controlled. India allows 51% FDI in multi-brand retail under the government route, subject to the investor fulfilling several conditions. States can also decide whether to allow foreign-owned multi-brand stores. India’s retail market was worth $883 billion in 2020, according to Forrester Research. The market size is expected to grow to $1.3 trillion by 2024, dominated by the grocery segment. With the Future Group’s retail, wholesale, logistics and warehousing units, Reliance was aiming to bolster its JioMart app and increase its presence in the online grocery delivery space. Even as the deal fell through, Reliance is in a sweet spot after taking over 947 stores of Future Group, citing non-payment of rent, after transferring the leases to itself. These include 112 Central and Brand Factory outlets of Future Lifestyle Fashions.

Reliance may reportedly bid for the remaining Future Group assets at the NCLT, leaving few options on the table for Amazon.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor