The corporate war between Kishore Biyani’s Future Group and Jeff Bezos’s Amazon Group resembles, at first sight, the battle between the mythological David and Goliath. On one side is Kishore Biyani, whose future group has assets worth about Rs 30,000 crore, slightly more than $ 400 million.
So on the other side is Jeff Bezos, the richest man in the world, and whose Amazon Group has a valuation of about 2 trillion dollars, 500 times more than Future Group. Apparently, in a fight between Kishore Biyani and Jeff Bezos, you will see Bezos’ upper hand. But when you put up India’s richest man Mukesh Ambani with Kishore Biyani in this fight, the fight becomes interesting. And then it would probably not be wrong to say that in fact, Ambani is not Biyani’s target.
1.RELIANCE Vs. AMAZON: What is the issue?
When the fight is going on between the big corporates of the world, the matter will be related to the business itself. The controversy started when the Future Group, facing an economic crisis, announced joining hands with Mukesh Ambani’s Reliance Retail. In August 2020, Reliance Retail decided to buy Future Group’s retail, wholesale, logistics and warehousing business for Rs 24,713 crore. According to media reports, Future Group owes about Rs 16,000 crore to banks and financial institutions. In comparison, the group’s founder and CEO Kishore Biyani is also in debt about Rs 11,000 crore. For Biyani and his group, this deal with Reliance Retail was seen as a profitable deal when only Jeff Bezos of Amazon Group came forward to break this deal.
2.Future Group – Why did Amazon have a problem with the Reliance agreement?
In August 2019, Amazon bought a 49% stake in Future Retail’s promoter company Future Coupons for Rs 1,431 crore. Since Future Coupons has a 7.3% stake in Future Retail, Amazon got 3.58% stake in Future Retail after this deal. It also had the rights to invest in the Future Group for rights of first refusals (first right to ask) and to buy a stake in Future Retail within 3 to 10 years. As soon as the deal between Future Group and Reliance Retail was announced, Amazon objected to the deal and took the matter to the Singapore International Arbitration Center, saying that Future Group had broken the agreement.
The Singapore International Arbitration Center issued an interim order favouring Amazon and said that the Future-Reliance deal should not be carried forward. But Future Group argued that Amazon is not its shareholder, and the arbitration centre’s order is of no importance in this matter. The Future Group took the matter to the Delhi High Court where the court accepted the arbitration centre’s order as valid and said that SEBI, Competition Commission, and other regulators could decide in this matter as per local law. While the Competition Commission has cleared the Future-Reliance deal, Amazon has asked SEBI, BSE and NSE not to approve the deal until the arbitration centre’s final decision.
A panel of 3 arbitrators has been formed at Singapore International Arbitration Center to hear the dispute between Future Group and Amazon. The panel’s main judge is Michael Hwang, who has been the Judicial Commissioner of the Supreme Court of Singapore. Apart from them, there are two arbitration panel members – Albert Jan van den Berg and Jan Polshan. The arbitration panel will hear both the companies’ arguments within a specified time frame and pass judgment. Generally, the grounds for challenging the International Arbitration Center’s decision are minimal and Indian courts also accept petitions challenging the decision only under certain circumstances.
For example, in August 2019, the Delhi High Court dismissed the petition of Indian Potash against the implementation of the judgment given by the Singapore Arbitration Center in a dispute between Glencore International and Indian Potash Limited. . Yes, if the decision of arbitration goes against any policy of the Government of India, the court can accept the petition challenging the decision. Companies can approach the High Court or the Supreme Court to challenge the International Arbitration Center’s decision. It has to be seen in whose favour the arbitration panel decides in the dispute between Future Group and Amazon.
3.How much does it matter to Kishore Biyani?
For Future Group and Kishore Biyani, the agreement with Reliance Retail can prove to be a lifeline. This will help them to repay their debts and to keep the functioning of the group running smoothly. As far as Reliance Retail is concerned, even though it is the largest retail chain in the country, it will join the country’s second-largest retail company as Future Retail, along with big markets like Big Home Town and Food Bazaar. And established brands, with the help of which it will strengthen its position in the retail space of the country. And this is the biggest problem of Amazon, which does not want to leave its strong retail market position of about $ 1 trillion.
Reliance Retail is number one in the offline space; it moves fast in the online space through Geomart. During the last few months, Reliance Retail Ventures has raised $ 6.4 billion through various companies to invest in Geomart. Compared with Amazon, Amazon has invested about $ 6.5 billion in India so far, along with $ 1 billion was announced by Amazon last year. Geomart has now announced to enter the fashion and electronics segment after grocery. Amazon was facing a big challenge in e-commerce in the country from Walmart-Flipkart till now, and now a new front has opened up in the form of Geomart. By stopping the deal of Reliance Retail with Future Group, Amazon is trying to win the first bet in the fight on this front.