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Amazon Stake Major Hurdle In Reliance Retail-Future Deal


Talks for a potential buyout of Future Retail, which runs the Big Bazaar chain, have reportedly almost reached its final stage as online retail behemoth Amazon, billionaire Mukesh Ambani-controlled Reliance group and Kishore Biyani-led Future Group are busy in ironing out the terms of the size of stake the US-based online retail titan will hold in the combined Reliance-Future entity.

The development comes at a time Future Retail has been adversely impacted due to the coronavirus-induced disruptions. Furthermore, Future Retail is scrambling for cash after it defaulted on a Rs 100-crore ($14-million) repayment on its $500-million foreign currency bonds last month. 

At present, Reliance wants to give a minor stake of 1-2 per cent, but Amazon aspires to hold at least 5-6 per cent stake in the combined entity, people with knowledge of the matter told ET. Worth mentioning here is that after purchasing a minority stake in Future Group earlier this year, Amazon India holds the legal rights to intervene in any stake sale that the Future Group enters into. More importantly, if the Reliance-Future transaction materialises, Amazon is likely to end up grabbing a minority stake in Reliance Retail.

“That’s where the negotiations are at this point in time. What would Amazon’s stake correspond to if and when Reliance acquires Future group,” a person familiar with the development told the financial daily.

Last year, the American e-commerce major, acquired 49 per cent stake in Future Coupons, a shareholder of Future Retail for around Rs 1,500 crore. Future Coupons owns a 7.3 per cent stake in Future Retail through convertible warrants. And Future Retail is the holding company of brick and mortar hypermarket chain Big Bazaar. Currently, Amazon is ready to infuse additional capital.

The publication quoted another person aware of the matter as saying, “Reliance group doesn’t need capital and there is absolutely nothing that Amazon can offer at this point in time. Also, the concern for Reliance group is that going ahead it would directly compete with Amazon, so how could the company have them as an investor?”. 

One of the persons with knowledge of the matter told the daily that Reliance had also proposed to acquire Amazon’s stake in a separate cash deal. But Amazon was not ready to sell its stakes.


Sandip Ginodia , CEO

 

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