Amazon vs. Reliance Retail: First shots fired in the Indian ecommerce battle

 Amazon Inc. recently sent a legal notice to Future Group for allegedly breaching its non-compete contract over the latter’s deal with Reliance Industries Limited (RIL). Hours later, Amazon took the matter further by approaching the Singapore International Arbitration Centre (SIAC) to try to call off the deal between RIL and Future Group.

According to Amazon, it had acquired a 49% stake in Future Coupons – a promoter group entity of Future Group’s retail business – for 15 billion rupees (approximately US$205 million) in December last year. As per the deal, Amazon holds a 3.58% stake in Future Retail Limited – the retail arm of Future Group in question and its flagship brand – and the right of first refusal to buy more stakes in the unit.

Amazon says the deal “breaches the terms of its contract by selling a significant portion of the business to Ambani’s Reliance Retail.”

Big funds rolling into Reliance Retail

Reliance Retail’s acquisition deal of Future Group has been bolstered by a string of investments amounting to over US$5 billion in the last few weeks from leading global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG, and ADIA.

This bestows big spending power on Reliance Retail, making it an even bigger threat in the ecommerce space. Not only will it have the massive infrastructure in place but also the financial capability to offer deep discounts to acquire customers – a strategy that current ecommerce leaders Amazon and Flipkart extensively used in their early stages in India.