Rutuja Panvelkar – FYMMS( M2140)
Reliance is among one of the most profitable industries in the world, reliance dominates the Indian market. It is alongside gradually growing as a dominant name in the international market by establishing its name extensively in various fields in the global market. Be it energy, natural gas, petrochemicals, mass media, telecommunications, e-commerce, television entertainment, music, retail or financial services, reliance’s outreach is widespread.
Now, focusing on Future group, it is important to know that Future Group is a household name in India in today’s date since it’s retail/fashion industries are among the most dominant in the market. Be it outlets like Big Bazaar, Brand factory, fashion brands like Indigo Nation, Bare, Spalding and Lombard, Future Group has established its sectors well enough to become a well-known name, which is a key contributor to its brand value today.
The timeline of this case goes back to 2019 when Future Retail had signed a bond with Amazon, the American e-commerce giant, letting Amazon acquire Future Coupons, a giant 49 per cent stake. Future Coupons was a promoter group of Future Retail. This indicates that Amazon indirectly owned 3.58 per cent of Future Retail. A call option was also given, which could be exercised between the third and tenth years. As a result of the call option, Amazon was able to purchase Future Coupons stake in Future Retail following the law. Future Retail would sell its supermarket chain Big Bazaar, premium food supply business food hall and fashion and clothing superstore Brand Factory’s retail and wholesale operations to Reliance Retail as part of the agreement.
Affected by lockdowns in the first wave of COVID-19, Future Group was on the verge of bankruptcy. A whopping ₹22,000 crore in debt. That is when it decided to sell its retail businesses and assets to Reliance for ₹24,713 crore in August, 2020. This sale will allow Reliance to completely dominate the Indian retail market with over 1,800 retail outlets. This merger of two retail heavy weights in the Indian market will make it virtually impossible for Amazon to establish a competitive e-commerce business in India.
Reliance Projects & Property Management, a unit of Reliance Industries, had taken possession of the properties of Future Group outlets for alleged non-payment of rents for more than a year. Reliance Projects had allowed the Future Group to operate on a “leave and license” basis from these sites, after forking out the retailer’s unpaid rentals to individual landlords and transferring the leases to its own name. In a letter to Future Group, Reliance has claimed the unpaid rents to it at Rs 4,800 crore.
Reliance Retail took control of 947-odd shops of Future Retail and Future Lifestyle Fashions with plans to rebrand them across various categories under Reliance Digital, Reliance Smart and Reliance Fresh, and Reliance Trends.
Now, before signing this deal, Amazon had indicated Future Retail to not sell its shares to certain companies in the contract, which were blacklisted by Amazon, violating which would lead to Amazon liquidating its shares in the company. Reliance, took over the stores after Future Retail defaulted on dues worth Rs 3,494.56 crore in December 2021 and on another 5,322 crore scheduled on March 31, 2022.
In August 2020, RIL had sealed a deal to acquire the retail business of Future Group for Rs 24,713 crore, which was opposed by American retail major Amazon, citing a 2019 non-compete agreement between Amazon and Future Group. The case is now being heard across forums including the Supreme Court, Delhi Court, National Company Law Tribunals and Singapore International Arbitration Centre (SIAC). This led to Amazon taking Future Group to Court, trying to prove that the said agreement between Future Group and Reliance Retail was invalid since it violated the clauses of the contract signed by Amazon and Future Group.
Future Group independent directors in their letter had charged Amazon of spiking Future Group- Reliance deal and rubbished Amazon allegation on them that they facilitated the so called fraud to handover stores to Reliance. Amazon, however, claimed that the independent directors letter vindicates its stand that the entire sequence of surrendering of stores by Future Group and termination by Reliance Group of such leases was a stratagem. Amazon claimed that despite Future Group admission that Reliance has forcefully taken over 55%-65% of its retail business, the Future Group now intends to enter into a business transaction with Reliance for sale of its supply chain and logistics businesses.
Amazon has asked independent directors to conduct thorough investigation into the alleged fraud committed by Future Group, its promoters, directors and key managerial personnel and raise concern over proposed transactions between Future Group and Reliance.