Reliance’s ‘capture’ of Big Bazaar stores raises questions – Reuters
Amazon has yet to get used to street fighting methods in India. From the night of February 25 last month, Reliance Retail staff began entering Big Bazaar stores and outlets across the country belonging to Kishore Biyani’s Future Retail Group. Overnight, hundreds of Future Group retail assets were “seized” and renamed.
Amazon has been in a see-saw dispute with the Future Group and Reliance since 2020, and has so far blocked the 24,500 crore sale of Future’s retail chain to Reliance. But he had not negotiated the forced seizure of Future’s assets. Reliance says it took over the stores after Future failed to pay rent for years, and it is simply taking over its properties after canceling subleases for default. Two Future Group companies had confirmed to the exchanges that they had received termination notices for 893 leased outlets. But is it a bilateral agreement or a forced takeover? The swashbuckling operation reinforced the perception that Mukesh Ambani’s Reliance, in conjunction with Future, was taking a bypass route to acquire the latter’s assets.
If the stores are transferred to Reliance, Amazon will have nothing left to defend, Amazon lawyer Aspi Chinoy admitted in court on Tuesday. But the shock came the next day, when Future’s Biyani told the Supreme Court that Reliance’s takeover was “drastic and unilateral” and that he had pledged to reverse the seizure of its outlets and “seek valuation adjustments”.
If the “takeover” of hundreds of stores was not cleared by Future Retail and was not carried out through due process, does this not amount to a forced seizure of goods? And isn’t that a criminal offence? There is a legal process to cancel a rental agreement, and it cannot be unilateral. What exactly is happening?
It’s a battle of Goliaths. Amazon, the world’s largest retailer with an annual turnover of $470 billion, arrived in India in 2013 and in less than a decade has created a huge digital market. Reliance Retail, started earlier in 2006, and is India’s largest retailer with revenues of over $22 billion a year. Over time, the Mukesh Ambani Group has shifted from its historical oil and gas business to retail and telecommunications as its primary focus. In this battle of the biggies, Kishore Biyani – the second largest retailer and the man who built the organized retail footprint with brands such as Big Bazaar, Pantaloon and E Zone – is sandwiched and bleeding, and look for an exit.
The roots of the dispute date back to 2019, when Future, seeking to survive, partnered with Amazon with the US multinational investing $200 million in a Future Group company. The deal also included several non-competition clauses that prevented Future from selling out to Amazon rivals, including Reliance Retail.
However, war soon erupted between the two parties when Future, hit by the Covid-19 pandemic, decided to sell its retail business to Reliance Retail in October 2020 for R24,500 crore. Amazon contacted the Singapore Arbitral Tribunal and suspended the sale. Since then, the two sides have been embroiled in heated litigation in Indian courts, with Future claiming that the seat of arbitration is not Singapore, but New Delhi. The stakes are high. Amazon says agreements it signed in 2019 with Future gave it special rights to Future’s retail assets, and some of those would revert to Amazon once foreign retail investment rules are set. relaxed. If the Future-Reliance deal goes through, Amazon’s entire business plan would be in jeopardy. For Reliance, on the other hand, merging its 1,100 supermarkets with Future’s network of 1,500 stores would make its market position unassailable. Up for grabs is a $900 billion retail market with 1.3 billion consumers.
Strange transfer of assets
The whirlwind of litigation will continue. Amazon and Future both told the Supreme Court that their attempts to negotiate a deal, cleared by the court on March 3, had failed. The Supreme Court has meanwhile lifted a Jan. 5 stay by the Delhi High Court on the Singapore Court of Arbitration Center (SIAC) hearing the Amazon-Future Group dispute.
Some things are obvious to those who want to see it. It is hard to imagine how an operation of such magnitude involving the takeover of hundreds of Future’s stores could have been planned and executed without the approval of the Future Group. On the ground, there was no resistance. Nor does there seem to be any intervention by the police machinery. The addiction is too big and too powerful for Amazon. It also enjoys state support. The Mukesh Ambani conglomerate has already taken over a third, or nearly 950 stores. The remaining 550 will also be transmitted in the coming days. It seems what Amazon is saying is true: very soon, the dispute over Future’s assets will be purely academic as Reliance gobbles up the prize through side deals. Can Amazon win in the long run? Maybe yes. It has deeper pockets, better technology, and a huge advantage over digital marketing formats.
An addiction too powerful for Amazon
The Mukesh Ambani conglomerate has already taken over a third, or nearly 950 stores. The remaining 550 will also be transmitted in the coming days. If the stores are transferred to Reliance, Amazon will have nothing left to defend.