Future Of Biyani-Reliance Deal Under Amazon Cloud

Amazon.com Inc.’s legal challenge to void Future Group’s ₹24,700 crore asset sale to Reliance Industries Ltd hinges on a clause in the e-commerce giant’s 2019 investment agreement in Future Coupons Ltd that explicitly bars the Kishore Biyani-led group from forging a pact with the Mukesh Ambani company, two people directly aware of the matter said.

Amazon has hired law firm AZB Partners to pursue the case against Future Group at the Singapore International Arbitration Centre (SIAC), the people said, declining to be identified.

“Reliance Industries’ name was specifically mentioned," said one of the two people. “This was a pre-condition for the Amazon-Future deal. As a serious competitor in the retail space globally, it was natural for Amazon to prevent Future Group from entering into any agreement with a large player such as Reliance Industries," he added.

Even if a Singapore International Arbitration Centre panel only allows Amazon to seek damages from Future Group for breach of contract, it will likely delay the ₹24,700 crore Reliance Industries-Future agreement.

The legal challenge also indicates that a battle is brewing between Amazon.com and Reliance Industries, which has become a behemoth in the offline retail space and has trained its sights on the online commerce space through its Jio Mart business.

In a span of about a month, Reliance Retail Ventures Ltd, the retail arm of Reliance Industries, has mopped up ₹37,710 crore from seven marquee investors, including Silver Lake Partners, KKR and Co., General Atlantic, Mubadala, GIC, TPG and Abu Dhabi Investment Authority.

While Reliance Industries is aiming to make inroads into the online retail space that is dominated by Amazon India and Flipkart, Amazon 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, has acquired the supermarket chain, More, from Aditya Birla Group in 2018.

Earlier this year, Amazon founder Jeff Bezos pledged $1 billion in new investments to help take small Indian businesses online.

India is among the first markets where Amazon is looking to engage at scale with local shopowners that drive a bulk of the country’s retail trade and are indispensable to the daily shopping habits here.

Amazon indirectly owns about 5% in Future Retail after buying 49% of Future Coupons for ₹1,500 crore last year.

According to Amazon’s interpretation, Future Group cannot sell shares of Future Retail to Reliance Industries or any other retail competitor.

The arbitration battle is set to intensify with the two groups hiring top lawyers to battle it out before the Singapore International Arbitration Centre panel. Future Group has hired Harish N. Salve for the arbitration.

“The legal officials from both groups will mutually decide the arbitration panel members within the next two weeks. The arbitration panel is likely to have 3 or 5 members," said the second person, adding that as part of the argument, Amazon will ask Singapore International Arbitration Centre to get Future Group to clarify why it did not answer any of Amazon’s queries since June on the potential deal with RIL.

The pact between Amazon and Future Group granted Amazon a call option, allowing Amazon to acquire all or part of the Future Group Promoters’ shareholding in Future Retail between the 3rd and 10th year from that date of the investment, the share purchase deal filed with the exchanges said.

The agreement also put share transfer curbs on the Future Group promoters on their shares in the group companies for the same tenure, according to the regulatory filings.

It also restricts the transfer of shares to specified persons, including RIL or its subsidiaries in the retail segment, and a right of first refusal in favour of Amazon.

Sandip Ginodia , CEO

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