Amazon Inc. is the new addition to the list of companies that have been outmaneuvered by Reliance Industries, Mukesh Ambani. Ambani has jolted the U.S. giant in the fight to dominate India’s retail sector by holding all the cards in the $3.4 billion buyouts of a cash-strapped local retailer.
In late February, reliance industries started taking over the rental lease of hundreds of stores and poaching of Future Retail Ltd and Future Lifestyle fashions Ltd employees despite Amazon’s attempt to block acquisitions through arbitrations and lawsuits across India and Singapore.
The bloodless coup by Ambani forced Amazon to seek a settlement in the bitter dispute. As per Bloomberg News, a letter dated March 5 was sent by Future Lifestyle to Reliance, asking them not to take actions that can be viewed seriously by lenders who charge on all company’s current and fixed assets. Banks may stop the line of credit, which will cripple the cash-starved retail company.
The Future Group’s involvement in the battle of two
The Future group is caught in a tussle between the two corporations after Amazon objected to Reliance’s offer to buy Future Retail Warehouses and Stores for $3.4 billion in August 2020. Amazon said that the deal violated the 2019 agreement with Future group company.
Before the pandemic struck, Future Group, India’s most significant retail grocery chain, became an easy target for the world’s two richest men, Jeff Bezos and Mukesh Ambani, to fight for control of the billion-plus consumer market.
Representatives of Amazon, Reliance, and Future Group did not respond to an emailed query seeking their comments on the development.
The fate of other investors in the Future Group, including L Catterton and Blackstone Inc., hangs in the balance as the three parties hammer an out-of-court settlement in by March 15 and submit their progress report to the Supreme Court of India.
According to Nirmal Gangwal, founder of Brecon & allied Partners LLP, a financial advisory firm in Mumbai, Reliance’s tactical win has given them the strongest position for negotiation with the other two parties.
Amazon is now the latest player to see how the Indian Conglomerate Giant, Reliance, dominates every sector it enters – Petrochemicals, crude, Telecommunication, consumer retail.
Reports from local media about the tacit takeover by Reliance by signing new lease agreements with landlords of 200 stores of Future and giving job offers to 30,000 workers from Future Group led Amazon to seek to bury the legal hatchet. After last week’s turn of events at the court was met with disbelief by Amazon after its lawyer, Gopal Subramaniam, said that Reliance has started taking over the stores despite Future Group hinting it would take six months to close the deal.
The drawn-out legal proceeding has hurt Future Group the most as it owns 300 billion rupees in total debt due to dwindling operations and cash flows.
