Reliance Industries' $3.4bn bid for Future Group's retail assets thwarted by high court ruling

Dispute over ownership of Big Bazaar supermarket chain owner looks set to continue

Kishore Biyani, the billionaire retail tycoon behind Future Group, has had his company's $3.4 billion sale to Reliance Industries blocked by India's Supreme Court. Prashanth Vishwanathan / The NationaShow more

India's Supreme Court on Monday halted regulatory approval for Future Group's $3.4 billion sale of retail assets to Reliance Industries, effectively blocking the deal for now.

The ruling is seen as a win for Amazon, the world's largest online retailer, which challenged the deal amid fierce competition for domination of the retail sector in Asia's third largest economy.

The US e-commerce giant had filed a petition to India's top court, contesting that Reliance Industries' transaction violates Amazon's contract with Future Group. Following Amazon’s petition, India’s top court on Monday overturned a lower court’s ruling and blocked the country’s companies tribunal from approving the deal until further notice. Reliance Industries and Amazon did not immediately respond to requests to comment. Future Retail confirmed the outcome of the hearing in a statement to the Bombay Stock Exchange.

The decision “is definitely a relief” for Amazon, said Divakar Vijayasarathy, the founder and managing partner at DVS Advisors, an international professional services company.

At stake is competition for access to India's $1 trillion consumer retail market in a country of more than 1.3 billion people, with an economy that is expected to expand rapidly in the coming years.

But as the legal dispute continues, troubled Future Group – best known for its supermarket chain Big Bazaar – is caught in the middle of the bigger battle between Reliance and Amazon. Primarily a bricks-and-mortar retailer that has been hit hard by the pandemic, Future Group has warned that if its transaction with Reliance does not go through, its retail unit is at risk of insolvency.

The company has more than 1,800 stores across India and the transaction would also give Reliance access to the group's logistics and wholesale business. This could provide a significant boost to its retail and e-commerce plans. Reliance is a sprawling conglomerate with interests ranging from energy to telecoms, controlled by India's richest man, Mukesh Ambani.

Amazon is investing billions of dollars in India as it tries to grab a larger share of India's e-commerce market. At the same time, Reliance has been upping the ante, for example with the launch of its online grocery delivery platform JioMart last year.

The latest development restores an advantage to Amazon in the tussle. In October, Amazon won an interim stay on the transaction from a Singapore arbitration tribunal.

But analysts warn that the fight is not yet over .

“The order of the Supreme Court is not a final order and it is the first leg of the proceedings,” said Mr Vijayasarathy.

“As far as Reliance and Future are concerned, the final verdict of the Supreme Court would be critical.”

Mr Bisen said that if Amazon does manage to scuttle the deal, Reliance will "have to start from scratch".

“Future has a lot of experience and it would have allowed Reliance to hit the ground running," he added.

In such a scenario, “the biggest loser would be Future and its assets and the financial stress it will create on Future's existence as a going concern”.

Shares in Future Retail were down by 6.5 per cent as the markets closed on Monday and fell 3 per cent during trade on Tuesday. Reliance Industries' shares were up about 1.5 per cent in afternoon trade.

Amazon and Reliance have gone head-to-head in this legal dispute because they have both entered into deals with Future Group. Amazon owns a 49 per cent stake in Future Coupons, which it bought in 2019, giving it indirect ownership of part of Future Retail. Amazon says that a condition of its deal was that Future Group would not be permitted to sell to certain Indian companies – including Reliance.

The Supreme Court has sought written statements from Future Retail on Amazon’s petition and plans to hear the case in five weeks' time.