Following an initial win in its bid to block the Future Group’s deal with Mukesh Ambani-led Reliance Industries, Amazon has fired its next salvo by urging India’s market regulator to investigate and not approve the deal.
The move brings a new twist to its tussle with its local partner, Future Group, and is also morphing into a battle of supremacy between the world’s richest man Jeff Bezos and Asia’s richest man Mukesh Ambani, analysts say.
Amazon is locked in a bitter legal dispute with Future Group, alleging that its deal in August to sell its retail assets to Mukesh Ambani-led Reliance Industries breaches agreements it made in 2019, when the US group bought a 3.6% stake in Future.
Amazon moved first to a court in Singapore after the Future-Reliance deal was announced and won an injunction last Sunday to halt the deal.
On Wednesday, Amazon also complained to India’s market regulator that Future’s deal with Reliance did not comply with its contractual obligations to the US e-commerce giant, and violated Indian regulations as well.
It urged the Securities & Exchange Board of India to block the Reliance takeover.
“It appears that the tussle is turning into an interesting clash of titans to capture a pie of India’s evolving retail sector, which is of strategic importance to both Amazon and Reliance,” Ankur Bisen, head of retail practice at Technopak, which claims to be India’s leading retail consulting firm, told Asia Financial.
“And both are expected to fight on.” After all, the stakes are high, Bisen said.
Largest Open Retail Market
India’s retail market is the largest open market globally by users and had turnover of about $700 billion last year, but it is expected to balloon to about $1.3 trillion by 2025, according to consultancy firm BCG and the Retailers’ Association India. And currently, e-commerce accounts for just 3% of all retail sales.
“While Amazon has already heavily invested in the Indian e-commerce market and has demonstrated its intent to become a leader, Ambani has chosen retail as one of Reliance’s future growth engines; he has already declared that he wants the flagship Reliance Industries to move its core focus away from fossil fuel to new age retail and digital businesses,” Bisen said.
The faceoff comes as Jeff Bezos-led Amazon is battling tighter foreign investment rules and antitrust cases in India, which is one of its key growth markets where it has committed huge investments.
While India is still a small contributor to Amazon’s total sales right now, it’s set to become an important growth driver for Amazon, according to Bezos. He reckons India has the potential to account for as much as 20% of Amazon’s global growth over the next five years.
To chase that target, Bezos has already committed $6.5bn of investments, including a $1 billion pledge in January to help small businesses in the country.
Ambani too has been making aggressive headway into India’s vast e-commerce space lately, which is currently dominated by Amazon and Walmart-owned Flipkart, which also made huge investments of $17.2 billion last year.
In August, the retail subsidiary of Reliance Industries, which also owns India’s largest offline retail chain, acquired the retail, wholesale, logistics and warehousing business of Future Group, the second-biggest bricks-and-mortar retailer.
That deal not only consolidated Reliance’s position in the country’s still-evolving organised retailing space, but also complicated the future of Amazon and Walmart’s Flipkart businesses in India.
It will help Reliance accelerate and provide “support to millions of small merchants in increasing their competitiveness and enhance their income during these challenging times,” Reliance said in the statement announcing the Future Group takeover.
Over recent weeks Reliance also announced a slew of acquisitions in the e-commerce space including an online pharmacy Netmeds, Grab (last-mile logistics), C-Square (analytics and resource planning), NowFloats (software solutions for SMEs) and Fynd (fashion e-commerce), to strengthen its online capabilities.
In an investor update on Friday, Reliance said it was looking at more acquisitions to strengthen its new commerce venture JioMart, part of the company’s retail unit, that competes with Amazon in hawking fresh food such as fruit, vegetables and dairy products. Beverages, fast-moving consumer products, and personal and baby care products are also part of the JioMart’s basket.
Friend Or Foe?
While it is too early to determine where the tussle is headed, “it is important to remember that in the game of dominance for market share, nobody is a friend or a foe forever,” Bisen said.
Sources suggested that Amazon may be putting pressure on to get a sweeter deal from Reliance.
Already “Amazon has sought damages amounting to $200 million (Rs 14.31 billion) along with interest [for] being invested in the Group”, the Future Group said in a stock exchange filing on Sunday.
In September, Amazon also expressed interest in acquiring 40% stake in Reliance Retail for $20 billion, but that was not concluded. And in July, Amazon reportedly held preliminary talks for a smaller (9.9%) stake.
Meanwhile in the past few weeks, Reliance attracted a string of investments amounting to over $5 billion from leading global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG, and ADIA.
“Therefore, I think, much of the recent offensive is posturing and this may lead to an out-of-court settlement,” Bisen said.
• Indrajit Basu in Kolkata, with Reuters.
This report was updated on January 9, 2022 for style purposes.