By Ritwik Sinha. Consulting Editor, Business India

After signing the over $3 billion deal with Mukesh Ambani’s retail company in late August, if Kishore Biyani of Future group felt that all his troubles were over, perhaps he overlooked a potential trouble spot quite close by. A relatively small partnership, which he had forged with Jeff Bezos’ Amazon in 2019, had opened the windows of a possible bigger alliance in the future. But that proposition has now completely vanished with Future’s sell-out to Reliance. 

Amazon on its part, however, hasn’t taken Biyani’s move too kindly and has legally challenged the deal, which could act as a spoiler to the new liaison. As analysts point out, if nothing else, it could at least delay the execution of the deal. The parties involved are tight-lipped, resulting in a host of speculative theories. 

Some reports suggest that Amazon, which had picked up 49 per cent in Future Coupons last year (an unlisted entity controlled by Future Retail) at a reported price of about Rs1,500 crore, has also got 5 per cent ownership of Future Retail in the bargain, which now goes to Reliance. A strong theory doing the rounds suggests that, while beginning a formal partnership with Future, Amazon had strongly put the condition that Biyani will not get into any partnership with Mukesh Ambani’s retail firm in future.

And by doing so, Amazon was protecting its interest. Like many others, Amazon would have well imagined that Reliance, with its strong offline presence, strong online ambitions, the possible support of Future group’s assets (fully or partially) and the larger planned convergence play with Jio, would get miles ahead of others in the organised retail game. 

Amazon is believed to have engaged AZB Partners to take up the case against Future group at the Singapore International Arbitration Centre (SIAC), where the global e-commerce giant may seek hefty damages for breach of contract. Future group has hired the services of Harish N. Salve. As and when the actual legal proceedings begin, Amazon legal team is expected to emphasise the point that its earlier deal with Future had accorded it with a call option to partially or fully acquire Future group promoters’ shareholding in Future Retail between the third and 10th year after its investment in Future Coupon. Future’s legal counselors, on the other hand, are likely to counter Amazon’s claim, saying that only listed entities like Future Retail and Future Lifestyle have been handed over to Reliance and not Future Coupons, where Amazon had invested. 

Firing the first salvo

The moot point is: why did Amazon choose to fire the salvo after Reliance and Future inked the formal deal? The final negotiations between the two domestic retail majors had gone for quite some time. So, why did Amazon prefer to stay silent during the making of the second biggest retail deal in India 

“With the best legal brains at their command, it’s difficult to believe that it could simply be a case of over-sight on the part of any one of them,” observes Ankur Bisen, Senior VP, Technopack Advisors. “Amazon, with over 35 per cent share in the nearly $30 billion Indian e-commerce market, is quite comparable to Reliance-Future combine in the offline space. Despite the emergence of the Walmart-Flipkart combine and now Reliance-Future formation, there is no dilution in its ambition to make India a major global turf for its business,” Bisen adds, while asserting that the case would eventually head to an out of the court settlement.