Explained: This is why Amazon has objected to the Future Group-Reliance Retail deal

 Explained: This is why Amazon has objected to the Future Group-Reliance Retail deal

What is the Future-Reliance agreement?

In August this year, Biyani’s Future Group entered into an agreement with Reliance Retail, a subsidiary of the umbrella Reliance Industries Limited (RIL) group, to sell its retail, wholesale, logistics and warehousing to the latter.

As a part of the deal, Future Retail will sell 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.

The Future group was under immense pressure from its lenders, led by the State Bank of India, to manage its debt, and the deal in seen as a bid by the group to cut down on the same. Before the August 2020 sale to Reliance, Biyani had been wooing several business groups to sell shares in several companies of Future Group in an attempt to cut down on the debt, but had not seen much success.

Following the nationwide lockdown in March 2020, to contain the spread of Covid-19, the retail business of Future Group had come under more stress. Sales in many of its premium food sales arm Foodhall and Brand Factory had come to a near halt in the lockdown, which lasted more than two months.

Why is Amazon objecting to the Future-Reliance deal?

BigBazar is one of the most important Retail Chain of Future Group

In year 2019, Biyani’s Future Retail had signed another deal with global e-commerce giant Amazon. As part of the deal, Amazon had acquired 49 per cent stake in Future Coupons, the promoter firm of Future Retail in a deal worth nearly Rs 2,000 crore.

While Future Retail would be able to place its products on Amazon’s online market place, the two had also agreed that the Future Retails products would also be a part of Amazon’s new plan, which intended to deliver products in select cities within two hours of a customer ordering them. Future Retails has more than 1,500 stores pan India.

The deal had also given Amazon a ‘call’ option, which enabled it to exercise the option of acquiring all or part of Future Coupon’s promoter, Future Retail’s shareholding in the company, within 3-10 years of the agreement.

After Future’s agreement with Reliance, Amazon said the deal was a violation of a non-compete clause and a right-of-first-refusal pact it had signed with the Future Group. The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.

On its part, the Future Group has said that it had not sold any stake in the company, and was merely selling its assets and had therefore not violated any terms of the contract.

Source: IndianExpress