Amazon Inc. is open to helping debt-laden Future Group bring in a new, financially strong partner or investor if it calls off its ₹24,700 crore deal with Reliance Retail Ventures Ltd, said two people aware of the US e-commerce firm’s plans.
They said Amazon, which holds a 49% stake in Future Coupons Pvt. Ltd (FCPL) had earlier informally helped Kishore Biyani-founded Future Group get new strategic partners and large institutional investors to help it with its debt crisis. Both people spoke on condition of anonymity.
Even after filing a legal case against Future Group for breaching a non-compete clause in the Future Coupons pact, Amazon is open to helping Future Group get a new investor, said one of the people cited above.
Amazon’s offer to help Future stems from the concern that the RIL-Future deal may significantly increase the competition for Amazon in India.
While Mukesh Ambani-headed RIL is eyeing the online retail space that is dominated by Amazon India and Flipkart, the US giant has been trying to build its presence in the offline retail space to complement its strong online presence.
Amazon, along with private equity fund Samara Capital, acquired the supermarket chain, More, from the Aditya Birla Group in 2018.
Through More and Future Group’s local outlets of Big Bazaar, fbb and so on, Amazon is able to offer a wide range of local merchandise products at cheap rates and deliver them at the buyer’s doorstep as fast as within a day.
“Future Group will be catering faster to RIL’s JioMart customers and not Amazon’s if the deal happens. This will put Amazon’s business at stake and make Amazon’s holding in Future Coupons redundant,” said the first person.
In 2019, due to FDI curbs in retail, Amazon could not have bought a majority stake in Future Retail. Hence, it bought 49% in FCPL for around ₹1,430 crore, which gave Amazon a minority stake in Future Retail.
However, this August, Future signed a deal with RIL to sell its retail, wholesale, logistics and warehouse businesses.
This prompted Amazon to file a legal case against Future at the Singapore International Arbitration Centre (SIAC).
On 16 October, at the first SIAC hearing on the matter, Amazon’s lawyers objected to the RIL-Future deal on the grounds that it violated Amazon’s 2019 pact with Future, which specifically bars it from tying up with RIL.
In a non-compete clause in the 2019 agreement, Amazon listed RIL among 30-odd entities with which Future Group was barred from entering into any share-sale agreement without Amazon’s consent.
During the five-hour-long hearing at SIAC before the arbitrator V.K. Rajah, the former attorney-general of Singapore, the three main points of contention emerged, said the first person. These were: alleged breach of the non-compete clause; alliance with RIL without Amazon’s consent; and Amazon’s recent efforts to bring in other potential investors for Future Group to help it deal with debts.
Future Retail argued that its deal with RIL did not breach any contract because Amazon’s deal is with FCPL, which is a separate entity. Future argued that the decision to enter a deal with RIL was taken by the board of Future Retail and not by the promoters alone.
The arbitrator is expected to give a ruling on 26 October.
Even if SIAC only allows Amazon to seek damages for breach of contract, it will likely delay the RIL-Future deal, which will aggravate the debt problems for Future Group.
“We cannot offer comments as the matter is sub-judice,” said an Amazon Asia Pacific spokesperson. An email sent to Future Group didn’t elicit any response.
