An Epic War involving Amazon and Reliance Shaping Up

An epic war between two of the world’s biggest business houses seems to be shaping up. It is for getting hold of the retail space in some of the world’s biggest consumer market, that is India.

In August 2019, the U.S. firm, the e-commerce online retail giant Amazon.com Inc., bought a 49 per cent stake in Kishore Biyani’s retail conglomerate Future Coupons, a promoter group entity of Future Group’s retail business, which owns 7.3 per cent of Future Retail for about Rs 15,000 million. This deal provided Amazon with a 3.58% stake in Future Retail, contractual rights like a right of first refusal, a non-compete-like pact, and to purchase more stake in Future Retail.

In August 2020, Mukesh Ambani’s Reliance decided to buy the retail and some other businesses of Future Group. The Future Group’s sale of its retail and wholesale businesses to Reliance Industries Ltd (RIL) triggered a dispute.

Also Read: Reliance Industries falls 7% post Q2 results

epic war

In October 2020, circumstances became such that Amazon had to spend some time, money and valuable resources in appointing law firms to launch some legal proceedings. Amazon has served a legal notice to Future Coupons over the deal with Reliance Industries. It will initiate arbitration proceedings against the Future Group and the arbitration will be outside India, most likely before the Singapore International Arbitration Centre.

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While enforcing contractual obligations, Amazon has also sent intimation notices to various parties including Singapore International Arbitration Centre (SIAC), Future Group and its shareholders, since the contract allows for arbitration as per media reports. Amazon has presented that the Reliance-Future deal is against the interest of Future Retail’s shareholders, as none of the shareholders will get anything since Reliance has technically bought assets of Future Enterprise.

The arbitration proceedings between Amazon and Future Group in Singapore are expected to start from November 2020 and could go on till Sept-Oct 2021 at least.

Amazon has levelled accusations against the Future Group as:

  • not meeting contractual obligations by going ahead with the Rs 2,50,000 million deal with Reliance Retail,
  • the Future Group’s $3.38 billion asset sale deal with Reliance Industries breached an agreement with Amazon, under which Amazon took an indirect stake in Future Group, on several counts,
  • Future Group was required to seek Amazon’s permission as Amazon has the first right of refusal in the event of stake sale,
  • This deal also violates a non-compete clause in the 2019 agreement,

October 8, 2020. Future Retail shares fell as much as 9% as the news of Amazon sending a legal notice to Future Group spread.

The truth and validity of such accusations will, however, be determined in the court and the matter has now become subjudice. Expert observers have opined that Reliance did not buy a stake in Future Coupons. It is not even buying a stake in Future retail. It is just buying assets like logistics, warehouses, etc. The well-known powers of Reliance may not make an easy battle for Amazon’s legal teams at the court.

Amazon, the retail behemoth, seems very keen to retain its hold in the lucrative retail space. It is exploring all options to stop the Rs 2,50,000 million deal between Future Group and Reliance Retail. This is a last-ditch effort by Amazon to delay the Reliance-Future deal. Amazon seems to fear that the deal will give Reliance a much firmer foothold in online space as well as physical distribution. This will indeed be an epic war in retail space which none of the parties would like to lose.

But will the epic war end in court or will it be arbitration are the outcomes what we have to look at. However, the time factor is sure to kill the retail investors!!

TATA-Walmart deal: A real game-changer in the Indian business landscape

The latest TATA-Walmart deal. In May 2018, the global retail giant Walmart purchased a 66% stake in Flipkart for $16 billion. Till date, it has been the country’s biggest-ever deal in the retail space. But, this may be overtaken latest by January 2021 by a new ambitious deal coming up between TATAs and Walmart.

One of the biggest news that has come up in recent times is: “Walmart is considering a $25 billion investment into Tata Group’s Super App.”

The TATAs proposed super-app may be launched as a joint venture, combining the Tata Group’s entire retail product franchise and Flipkart’s offerings from Walmart.

Waiting to be lifted

Super Apps from Tata group can definitely provide a comprehensive solution for B2B2C. The Tatas seem to be working with advisers to bring in global tech companies, including investors, for the digital entity. Goldman Sachs may have been asked as the investment bank for this deal.

Tatas, the pioneer of the Indian tech industry, stayed inactive for a while but now the group is catching the super app fever. It may have to reset its supply chain network. Given how foreign capital has built a strong infra for online/e-commerce, this is the most promising time for super apps to mushroom.

Amazon and Reliance Jio, which is planning a similar offering with Facebook are set to have a new competitor in terms of variety and economies of scale. As the end-user, the beneficiary is the consumer, such a competition is good for the Indian digital ecosystem.

The $20-25 billion TATA-Walmart deal is surely going to make a huge impact in the industry as the TATAs, one of India’s most ethical corporate houses is vying to level the space hitherto dominated by the likes of Amazon and Reliance Jio. With Reliance & TATAs along with their foreign collaborators dominating the business space across the horizon, it will be a real game-changer in the general Indian business landscape. What will Amazon do next? And what will happen to Walmart and Flipkart?

India’s Tata Group have now felt the need to consolidate it’s ecom businesses to compete. It is still largely an untapped business opportunity in India. The TATAs are still way behind Reliance Industries Limited moves with Jio and its investments by Facebook and Google.

The TATA-Walmart deal should ruffle some feathers. So much is going on in Indian emerging markets and eCommerce news. The online space is just heating up now.

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Hereinafter, it will be interesting to see how other large FMCG conglomerates will charge their game plans. Will Hindustan Unilever do something similar? HUL has been in India’s retail business for more than eight decades or so. It knows retail business here very well in every nook and corner of India and has a great network of dealers. HUL also attracts good talented people and has good financial resources.

Large investments in technology with an established corporate house. This is certainly exciting news. Such deals, in effect, inspire other Indian companies, investors, associates, creates multiple job opportunities and benefits the general public.

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Such deals further endorse the fact that India is indeed one of the biggest playing fields for global e-commerce market share. Given the size of India’s consumer base, giants like Walmart can not afford to keep India out of its loop for long. Walmart must have been eager to get a globally known strong brand supporting its e-commerce business in India. There could not have been a better choice other than the Tata group as it is an established and respected player in the online space. Moreover, its competitor, Amazon, is investing aggressively in more horizontal tech investments. It is investing in Alexa for cars, Music, Esports, Videos, etc. This upcoming TATA-Walmart deal seems to be a good sign for Walmart which has to invest in other markets besides the US. The TATAs in India has given it the right opportunity at the right time.