E-commerce giant Amazon is trying to stall its Indian partner Future Retail from selling its assets to oil-to-retail conglomerate Reliance Industries. After approaching an arbitration court in Singapore to stall the deal, Amazon has asked India’s market regulator to review the sale. It is now accusing its Indian partner of insider trading and misleading shareholders.
Reliance agreed in August to buy retail, logistics and other assets of Future Group for US$3.4 billion as it looks to strengthen its online retail operation to take on Amazon and Walmart-owned Flipkart. Future Group was under immense pressure from its lenders, led by the State Bank of India, to manage its debt. After India went through a two-month Covid-19 lockdown, Future Group’s businesses came under severe stress and sales slowed to a trickle. Its promoter, Kishore Biyani, was on the lookout for a buyer.
Amazon alleges that the deal breaches the agreement it made with Future in 2019. The US e-commerce giant last year picked up a 49% stake in Future Coupons, the promoter of Future Retail, for 14.3 billion rupees ($193 million). This gave Amazon a small stake in Future Retail, as Future Coupons owns 7.3% of the group’s retail arm. The contract also gave Amazon the first right of refusal, which meant Future Group could not sell its shares without Amazon’s approval, and the US e-tailer has the first right to invest if it wants to sell them. There is also a non-compete clause, which prevents Future Group from approaching Amazon’s competitors.
Future Group had contended that it had not sold any stake in the company, but was selling its assets and therefore had not violated any terms of the contract. It had entered into an agreement with Reliance Retail Ventures, a subsidiary of Reliance Industries, to sell its retail, wholesale, logistics and warehousing businesses. This included the sale of its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail as well as wholesale units to Reliance Retail.
In its complaint to the Securities and Exchange Board of India, Amazon has alleged that Future Retail has disclosed to Reliance price sensitive details of an injunction granted by a Singapore arbitrator to block the deal. It has also accused the Indian retailer of misleading shareholders by incorrectly saying it was complying with its contractual obligations with Amazon.
Last month, the Singapore International Arbitration Centre told Future Group not to proceed with the sale and await the outcome of the arbitration process. The matter was heard on October 16 by former Singapore Attorney General V K Rajah – the sole arbitrator in the case. As a counter, the Indian retailer has approached the Delhi High Court alleging that Amazon was interfering with its deal with Reliance Retail on the basis of an interim order by a Singapore arbitrator.
Reliance Group, owned by India’s richest man Mukesh Ambani, is looking to further consolidate its footprint in the offline retail market. Its retail arm Reliance Retail operates supermarkets, consumer electronics chain stores, cash and carry wholesale business, fast-fashion outlets and online grocery store JioMart. Its move to offload a 15% stake has attracted a host of global investors, including TPG, GIC, Silver Lake Partners, KKR and Mubadala.