Amazon CEO Jeff Bezos takes on Reliance Industries founder Mukesh Ambani over Indian retailer Future Group, drawing battle lines between two of the world’s richest men for the country’s lucrative e-commerce market.
On Sunday, the Singapore International Arbitration Center granted an emergency interim order in favor of Amazon, after the US tech group filed a complaint related to a $ 3.4 billion deal that Reliance closed with Future Group in August.
Amazon, which acquired an indirect minority stake in the retail and fashion conglomerate last year, alleged that Future’s sale of its retail, wholesale, logistics and warehousing businesses to Reliance violated its pre-existing contract, which included a right of first offer. and a non-competition clause. The deal is now on hold until a final decision is made.
The legal battle comes as Amazon and Reliance go head-to-head in a battle for dominance in India’s burgeoning e-commerce market, which will be worth $ 86 billion by 2024, according to research firm Forrester. The stakes are particularly high for Amazon, which believes India is a high-growth market after closing its online store in China last year.
$ 5 billion
Amount Mukesh Ambani’s Reliance Retail has raised from marquee investors
Reliance, already the largest offline retailer in India, with more than 11,000 stores and revenue of $ 18.5 billion last year, has a small presence in e-commerce. But it is embarking on a strategy to evict Amazon and Walmart-owned Flipkart, which together control about 70 percent of the online market in India.
After raising $ 20 billion from global investors for Reliance Jio, its telecommunications and digital services business, Ambani has since started another fundraising campaign for its retail arm. Raising more than $ 5 billion from marquee backers so far, his vision is to digitize Reliance Retail and its huge offline network.
“Now, with the type of financing that Reliance has, it is clear that they will play in the same [online] markets like Amazon and Flipkart, ”said Rahul Malhotra of Bernstein in Mumbai. “This is the beginning of a more competitive era.”
‘Ambani is behind what Bezos has’
The battle for Future Retail comes as Amazon and Flipkart seek alliances with traditional retailers in India, as part of a drive to expand and comply with new regulations limiting foreign players in the e-commerce sector.
Amazon, Reliance, and Future Group declined to comment for this story.
The skirmish is the latest setback for Bezos in India after a high-profile trip in January fell through, and the Commerce Minister said the Amazon chief’s promise to invest $ 1 billion to digitize small and medium-sized businesses across the country was not “excellent”. favor to India ”.
Bezos, who has invested billions in India since starting operations there in 2013, had been unable to secure a meeting with Modi when he arrived in New Delhi, a person close to Amazon said. Later, Bezos had breakfast with Ambani and other industrialists in Mumbai.
“They are great rivals, obviously. Ambani is behind what Bezos has, ”said a Mumbai banker. “A typical middle-class Indian kid wants to shop online and thinks Amazon, not Reliance Retail or JioMart,” he said, referring to Reliance’s online grocery delivery store.
Despite intermittent talks this year about the possibility of Amazon taking a stake in Reliance Retail, analysts said Bezos was wary of forming a partnership with the powerful Indian mogul. Ambani was also reluctant to hand over any majority stake or control to his rival, people close to Reliance said, hampering any genuine effort to reach a deal.
Ambani has been a magnet for investment as it seeks to transform its energy conglomerate into a homegrown tech superpower. He has made no secret of his plans to make Jio Platforms the next Internet giant.
“Jio wants the maximum amount of household expenses to reach them,” said Satish Meena, an analyst at Forrester based in New Delhi. “They’re doing the same thing they did with telecommunications, and if they can control grocery purchases, they’ve captured most of the family spending.”
Future operates some of the most prominent retail brands in India, such as the Big Bazaar supermarket chain and the premium grocery store Foodhall. If Reliance’s alliance with the group came to fruition, Ambani’s empire would control 40 percent of the country’s formal grocery market.
“Why should a foreign company dominate?”
Despite Amazon and Flipkart lagging behind in their online user experience, analysts say that Reliance has the advantage of being on the right side of a growing wave of protectionist policies in India.
“In Mumbai business circles, Amazon is seen as the new East India company,” said a person close to Reliance, referring to the private British corporation that ruled large swaths of the Indian subcontinent in the 18th century. “Why should a foreign company dominate when we have local giants, from Ambani to Tata and Birla?”
Changing e-commerce regulations in the country have raised familiar questions about New Delhi’s treatment of its biggest foreign investors, with Vodafone spending years fighting a € 3 billion tax dispute with Indian authorities related to the acquisition of an operator. local.
After Walmart paid $ 16 billion for Flipkart in 2018, the largest individual foreign investment in the country, New Delhi changed its rules for the sector only months later, prohibiting foreign companies from holding their own inventory and allowing them to operate only as ” markets “online. connecting sellers with buyers.
To avoid these rules, Amazon and Flipkart have been acquiring stakes in Indian retailers to deepen their supply chains. Amazon has stakes in the department store Shoppers Stop and the supermarket chain More, which is part of the Aditya Birla Group. Flipkart announced on Friday that it paid $ 200 million for a 7.8 percent stake in Aditya Birla Fashion and Retail Limited, which has more than 3,000 stores in the country.
The outcome of Amazon’s legal battle with Future was difficult to predict, analysts said. Reliance said in a statement that it “intends to enforce your rights and complete the transaction. . . with the Future group without delay ”.
At the very least, however, arbitrage would buy some time for the US group, said Neil Shah, an analyst at Counterpoint in Mumbai.
“Amazon could put a wrench in the wheel to try to stop Reliance’s expansion,” Shah said. But Reliance is making big moves and is a big threat. The ball is in Mr. Ambani’s court. “
