Mumbai, March 6 (US): At a large Future Retail Supermarket (FRTL.NS) in Mumbai last week, workers were unloading hundreds of bright blue grocery boxes belonging to India’s largest retailer, Reliance.
Potential customers were turned back by security, frustrated by the closed state of the store that still carries the banners of the future biggest brand, Big Bazaar, but is likely to be soon rebranded as a Reliance outlet.
Across India, similar scenes are being played out as Reliance Industries (RELI.NS), the largest Indian conglomerate run by Mukesh Ambani, the country’s richest man, proceeds with a surprise de facto takeover of prized retail real estate owned by Amazon.com Inc. Obtaining partial ownership.
The high-profile, bitter dispute between the corporate giants in which Amazon sought to block Reliance’s planned $3.4 billion purchase of Future Group’s retail assets, is currently before India’s Supreme Court, Reuters reports.
The acquisition of Reliance began in full cover on the night of February 25, when its employees began arriving in future stores. Many in the Future Department were aware of the plans as store employees from across the country began calling frantically, according to people with direct knowledge of the matter.
“The situation was tense, everyone was in a panic. We didn’t know who they were. They wanted to arrive, and the old people didn’t know about it,” said an employee of Big Bazaar in New Delhi.
One of the sources said that at the Future store in Sonipat, in the northern state of Haryana, advertisements were made asking customers to leave with Reliance in control. Another source in Vadodara, western Gujarat, said that employees who arrived for work the next morning were told to go home without explanation.
Citing unpaid payments by Future, Reliance has taken control of the operations of about 200 Big Bazaar stores and has plans to take over 250 of Future’s retail outlets. Combined, they represent the crown jewels of the retail network of the future and about a third of its outlets.
Although Reliance did not play a major public role in the legal dispute, it has, according to sources, for several months assumed several leases held by cash-strapped Future, India’s No. 2 retailer and Amazon’s separate business partner.
Reliance’s sudden acquisition of the stores appears to have shattered what some analysts describe as an honor coup that spoils Amazon’s chances of untangling the transfer of Future assets to Reliance. This is despite a series of legal battles that the US e-commerce giant has won so far to block the announced 2020 deal between the two Indian companies.
Future Retail said on February 26 that it was “reducing operations” to cut losses, although it made no mention of Reliance in its statement. Future Group has more than $4 billion in debt.
Sources said Reliance plans to keep Future employees in the stores it manages.
Amazon, which has a stake in a separate Future Group unit that it says is preventing Future from selling retail assets without its permission, has described supermarkets and other stores as an “irreplaceable” network in a sector with $900 billion in annual revenue.
Legal disputes, over time, became increasingly risky and were characterized by ugly rhetoric. At one point, Amazon sought to have future CEO Kishore Biyani in jail for violating a legal order. Amazon was once compared to Alexander the Great and his “ruthless ambition to burn the earth”.
Six days after Reliance’s move, Amazon in a Supreme Court hearing unexpectedly called for amicable talks to end the dispute, a proposal that Future agreed to.
Discussions are expected to start soon.
Whatever the outcome of the talks, analysts say Amazon has seriously underestimated Reliance.
FA