Bad news for Amazon as Ambani's RIL seizes the future of retail in India
In the end, Indian billionaire Mukesh Ambani settled
the dispute over who gets to own the assets of beleaguered Future Retail Ltd.
not in an arbitration tribunal in Singapore, or in a courtroom in New Delhi,
but in a shopping aisle.
Future Retail had
been subleasing store space from the tycoon’s Reliance
Industries Ltd. Indeed, it was kept operating only on Ambani’s
forbearance because Future couldn’t come up with the rent. But with Amazon.com continuing to
block Reliance’s $3.4 billion purchase of Future’s assets, Ambani decided to
make the acquisition a fait accompli: He terminated the leases and is taking
control of the properties.
It was a dramatic denouement to a three-year-old saga. Amazon was Future’s
original rescuer, investing $192 million into a gift voucher unit controlled by
its founder Kishore Biyani so he could use the money to steady the debt-laden
Indian retailer.
The condition of that 2019 deal was that assets — about 1,500
stores nationwide — wouldn’t be sold to Ambani, who owns India’s largest retail
empire. When Biyani did exactly that after Covid-19 decimated operations, Amazon began
proceedings against Future for breach of contract. The Reliance deal was in
limbo — until Ambani decided he’d had enough.
The desperation was palpable in the messages Future sent Reliance.
“Please confirm that there will not be any reduction in consideration payable,”
said a March 2 missive from Future, as reported by Saritha Rai and P R Sanjai
of Bloomberg News.
Then, one paragraph later, “It is important for our stakeholders to have
visibility on the final consideration.” Was Future Retail living
under a rock? Its bailout by Ambani was always clearly a commercial deal, not a
humanitarian mission. It was Future’s job to take care of its stakeholders,
including creditors.
And where’s Amazon in all this? By now, it must have learned that
taking on Ambani on his home turf was futile. Once the ground had shifted from
under its feet, Amazon offered an out-of-court settlement over its funds
infusion in Future Coupons Pvt. — which had been its first move in the drama.
Amazon couldn’t have rescued Future Retail directly because India’s draconian
foreign direct investment rules were in the way. So it did the next best thing:
funding privately held Coupons and, thus, indirectly exercising some control
over Retail.
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