Business War: Amazon vs Reliance

Who will take over Future Retail Stores?

Fri Aug 27, 2021

Amazon is favourite to beat Reliance?

Recently, the two biggest companies have been at war. Reliance and Amazon, The reason? Kishore Biyani’s The Future Group! Why were these two companies at war because of the future group? 

For the fiscal year that ended in 2021, the group made a loss of Rs 5,943 crore on sales of Rs 11,723 crore, a drop of 66 percent over fiscal 2020. The group’s total debt was up by 7 percent to Rs 20,742 crore. Future Group couldn’t incur the losses they made so they decided to make a deal to sell $3.4bn worth of retail assets to Reliance Industries earlier this year.

Since 2019, Amazon has owned a 49% stake in Future Coupons, which gives it an indirect ownership stake in Future Retail. Amazon argues that as a part of that purchase, Future Group was prevented from selling to a select group of Indian companies, including Reliance. Amazon then challenged this deal and initiated an arbitration process at Singapore International Arbitration Centre (SIAC). Amazon argued that Biyani’s asset sale to Reliance Retail is a breach of a 2019 agreement between Amazon and Future. The SIAC ruled in favor of Amazon and put the Reliance-Future deal on hold. However, Future and Reliance refused to comply with the order. 

Notably, there is no mechanism available in India that enforces international arbitration’s order. Amazon then approached the SEBI not to approve the Reliance-Future deal and pressed for Reliance and Future to comply with the order. In the Arbitration and Conciliation Act, 1996, there is a clause for enforcement of an interim order passed in a foreign seated arbitration.

The Supreme court favored Amazon’s decision and the deal between Reliance and The Future Group is on hold currently. What does it mean for Amazon and Reliance to fight here? Why is it important for them? 

E-commerce has transformed the way business is done in India. The Indian E-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. As of September 2020, the number of internet connections in India significantly increased to 776.45 million, driven by the ‘Digital India’ program. 

The Indian online grocery market is estimated to reach US$ 18.2 billion in 2024 from the US $1.9 billion in 2019, expanding at a CAGR of 57%. India’s e-commerce orders volume increased by 36% in the last quarter of 2020, with the personal care, beauty, and wellness (PCB&W) segment being the largest beneficiary. India’s consumer digital economy is expected to become an US$ 800 billion market by 2030, growing from US$ 85–90 billion in 2020, driven by strong adoption of online services such as e-commerce and ed-tech in the country.

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