NEW DELHI: Besides slapping a legal notice, Amazon Inc has approached the Singapore International Arbitration Centre (SIAC) claiming that Future Group has breached a contract under which the US-based e-commerce major has ‘first right’ to acquire all or part of the promoters’ stake in Future Retail, and also includes a non-compete clause. Amazon has petitioned the SIAC to halt the deal between Reliance Industries and Kishore Biyani-led Future Group under which the former is set to take-over Future’s retail assets.
“We have initiated steps to enforce our contractual rights. As the matter is sub-judice, we can’t provide details,” said an Amazon spokesperson.
SIAC is a non-profit body that provides an alternative dispute resolution system for cross-border transactions involving foreign companies beyond the traditional forum of the courts.
In 2019, Amazon agreed to pick up a 49 per cent stake in Future Coupons Ltd, which owns 7.3 per cent of Future Retail. That deal gave Amazon roughly 3.6 per cent in India's largest listed retail entity. As part of the agreement, Amazon holds the first right to acquire all or part of the promoters’ shareholding in Future Retail, between three and ten years after the transaction, i.e post-November 2022. The agreement also has a clause that restricts them from selling the shares to any third party or competitor (such as Reliance) without their consent. Sources also say that Biyani had agreed to certain share transfer restrictions on the promoter shares in the company for the same tenure and that the right of first refusal was on Biyani’s own shares. However, in August 2020, Reliance Retail Ventures Ltd (RRVL), a subsidiary of Reliance Industries, acquired Future’s retail, wholesale, logistics and warehousing businesses for about ₹25,000-crore and Amazon has alleged that this deal does not comply with the contract.
A Future Group spokesperson didn’t comment on the matter.
An industry executive aware of the development said that the legal notice from Amazon could delay completion of the proposed slump sale that is awaiting regulatory approvals, but it is very likely that the case will be settled through negotiations, especially since Amazon is keen to tie-up with Reliance Retail and further strengthen its foothold in India.
“It is surprising that Amazon has raised its objection more than a month after the deal was announced. It is possible that the companies may come to some mutual agreement and pay Amazon a good premium for their stake (they intend to buy in Reliance Retail) for a quick resolution,” the executive said on condition of anonymity.
The war for a slice of the burgeoning retail industry comes at a time when Reliance Retail has been on a fundraising spree, garnering well over Rs 37,700 crore in less than four weeks from global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG and ADIA.
With its 12,000 stores along with another 1,800 that will get after the Future deal, Reliance aims to sharpen its focus on consumer businesses to tap the growth in both offline and online retail in the Indian market through its new commerce platform --- JioMart. The investments squarely equip Reliance Retail with funds as well as technological expertise to cement its position as the undisputed leader in the organised retail segment and bolster its e-commerce to take on rival Amazon. On the other hand, the deal would also help at restoring normalcy at the beleaguered Future Group. The group's entities have defaulted on loans at least four times and lenders have n refused to extend fresh loans to the company.
Amazon, Future in tug of war over retail unit