Amazon moved to the Supreme Court of India with a plea to enforce an emergency award challenging the decree of Delhi High Court allowing statutory authorities such as the National Company Law Tribunal (NCLT) and Securities Exchange Board of India (SEBI) to seek approval of application filed by the Future Group to complete its Rs 24,731 crore asset deal with Reliance Retail.
Amazon wins as SC rules against the Reliance-Future Group deal on August 6, 2021. This proves to be a big boost for Amazon and an equally significant setback for Reliance. Read through the article to learn all the facts about the case, and check how its result affects both the parties dearly!
The Conflict - How it became Amazon vs Reliance!
The Indian E-commerce sector had become witness to a tug of war between Amazon and Reliance industries since Future group made an asset sale deal with Reliance Retail Ventures Limited (RRVL), a subsidiary owned by the owner of Reliance Industries, Mukesh Ambani. According to the same, the Future group will be giving up their entire retail, wholesale, logistics, and wholesaling businesses to RRVL.
Amazon had already acquired 49% stakes in Future Coupons making it a 10% stakeholder in the Future Group. The latter signed a “Right of First Refusal” deal with Amazon stating that Future Coupons will not sell its assets to a list of companies without Amazon’s consent so as to block competitors. Reliance Industries was one of the companies on the list.
Parties to the Conflict- Reliance, Amazon & Future group
Future Retail signed an asset sale deal with RRVL for 24,731 crore, which resulted in a breach of contract between Amazon and Future Retail. This is why Amazon had taken the matter to the Singapore International Arbitration Centre (SIAC) and pleaded to order stay on carrying out this deal. SIAC issued an emergency award ordering a stay on the fulfillment of the deal between Future Retail and Reliance Industries.
Amazon, with 7 lac sellers in its kitty, is desperate to enter the Indian retail market. On the other hand, Reliance has already established itself with 11,784 stores all over the country. And now, after buying Future Retail, it will become the third largest retail conglomerate in the world with Future’s 1800 stores and brands including Big Bazar, FBB, Easyday, Nilgiris, Central and Brand Factory.
Reliance is already known as a telecom giant after launching JIO and has already entered the retail market with JioMart. It had an advantage over Amazon since a large Indian population still prefers shopping at grocery stores and kiranas. JioMart is planning to collaborate with these small vendors as it has upheld the motto “Local for Vocal”. The consumers may lean towards this motto since Reliance represents the home ground. Reliance may be an old player in telecom and oil but the retail market is completely based on consumer satisfaction. When you face issues with your network, you’d switch to another one but that involves a whole new process. But when the services from an e-commerce platform disappoint you, chances are you’d never go back. Amazon has been performing aces on the customer satisfaction and delivery front. Reliance still has a lot of catching up to do.
Amazon’s short lived victory
The SIAC, to Amazon’s relief, ruled out an emergency award to stop the deal being carried out between Future Group and Reliance Industries Limited. This relief was short lived as Future Group challenged this decree in the Delhi High Court, stating in a plea that this decree is invalid in India under Sec 17 (1) of Arbitration & Conciliation Act and hence, is not enforceable. The Delhi High Court asked Reliance and Future Group to maintain their status quo and encouraged the NCLT and SEBI to acknowledge the deal between Reliance and Future Group.
Amazon then moved the Supreme Court of India challenging the order issued by the Delhi High Court on February 2nd. “The order of the high court is illegal, and arbitrary apart from being without jurisdiction, therefore the same is liable to be set aside on this ground alone” stated Amazon’s appeal in the high court proceedings.
What happens when either of them wins?
If this deal goes through, Kishore Biyani, the retail king who’s been ruling the market for over three decades, gets rid of debt on promoter level and listed entities level. The identified assets will be transferred to Reliance Retail & Fashion Lifestyle Limited as a going concern on a slump sale basis for Rs 5628 crore. Future Group will be saving its 25000 employees with their jobs kept intact. Reliance Industries will be taking over the liabilities too. If the status quo on the deal is vacated, Future Group will have no option other than liquidating itself.
As in the case of Reliance, this deal will make it a monolayer in the retail market. It will acquire already set up stores across the country and will be spreading its business faster. Since the announcement, Reliance’s shares have shot up from Rs 500 to Rs 1250 in a matter of months.
The Big Judgement from Supreme Court goes in favour of Amazon
The much-awaited decision from Supreme Court ultimately stands in favor of the earlier ruling of the Singapore International Arbitration Centre (SIAC) and thereby, halting the Reliance-Future Group deal.
This is bound to be a huge win for Amazon, blocking its competitor and a considerable setback for Reliance. The deal amounted to a total of Rs 24,713 crores, which comprised of a takeover of 1,800 stores of Big Bazaar, EasyDay, FBB, and Food Hall, in an attempt to further expand its business across the country. Furthermore, Reliance was also on the verge of taking over the debt and liabilities of the Future Group amounting to Rs 19,000 crores as part of the deal.
As soon as the judgement was passed by SC, Reliance shares were noted to be falling by 2% on the stock markets. Future Group's retail shares also tanked by 10% as a result of the long drawn battle between Amazon and Reliance, which it was a part of!
Who else is trying this gimmick?
The TATA’s are trying to take over Big Basket by buying a majority stake of 500 to 700 million dollars, as well as a substantial stake in 1mg, an online drug retailer. Flipkart bought 8% stakes in Aditya Birla Fashions by paying a sum of Rs 1500 crore and signed a “right of first refusal” clause as well.
The retail market is on the edge as big players move their money around. There already is a shift in consumer patterns since everything from smartphones, appliances, policies to medicines and groceries are becoming a part of the online retail market. And now we wait and watch, as Amazon and Reliance play their hacks.