Global retail giant Amazon.com Inc. has sent a legal notice to the promoters of Future Group India over a deal with Reliance Industries. The notice has been sent for breaching the terms of Amazon’s contract by selling a significant portion of the business to Ambani’s Reliance Retail.
Amazon and Future group also had a deal in place before Reliance came into the picture. Last year, Amazon acquired a 49 percent stake in Future Coupons, a group entity owned by Future Group’s retail business. The deal led to Amazon having a 3.58 percent stake in Future Retail, Future Group said in a filing at the time.
Future Group had announced in late August that it was selling its wholesale retail business and logistics business to Reliance Retail for about USD 3.4 billion. Amazon’s investment in Future Group had some contractual rights.
Amazon, in the notice, referred to the contract arrangement that included a list of restricted companies Future was not supposed to enter into deals with.
The legal notice has confused many, as Amazon is preparing to acquire a multi-billion-dollar stake in Reliance Retail.
Amazon, Reliance, and Walmart’s Flipkart are in a war to gain market share in India, where many customers are adopting online purchases of food and groceries due to the social distancing COVID-19 pandemic situation.
With e-commerce commanding only between 3 -7 percent of all retail sales in India — and Reliance Retail launching its own e-commerce business to fight Amazon and Flipkart — this deal with Reliance Retail is referred to by analysts as crucial for Amazon’s future in India. Amazon, which started its journey in India seven years ago, has invested more than USD 6.5 billion in its local business in the country.
Reliance Retail and Future Group did not comment. However, Amazon confirmed that it had filed a legal notice but did not provide any further details as the matter is “sub judice.”
Reliance Retail, which was founded in 2006, now serves about 3.5 million customers each week (as of early this year) through its 12,000 physical stores in more than 6,500 cities and towns in India.
Ahead of the report, Reliance Industries shares closed 2.13 percent at Rs 2,257.15, while Future Retail dropped 1.89 percent to Rs 88.30, and Future Enterprises declined 1.68 percent to Rs 11.74.
Future Group, which started its journey in the 1980s, has been serving millions of customers. It had about 1,500 stores in more than 400 cities of India earlier this year.