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Amazon & Reliance deal over the Future Group:

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The Corporate World is full of twists and turns. One side where the entire world is distracted by the return of Covid-19 in a massive way ruling all the headlines of the media and Newspapers, the other side witnesses an entirely different scenario.

Two prominent and big names of the Business world, Amazon and Reliance fighting like cats and dogs over the Future Group deal. 

Let’s first give you a brief Lowdown about what the entire story is?  Amazon has invested in Future Group and bought a 49% stake in the company. This stake was basically in the Future Retail part. The Competition Commission of India has also given a nod for this 24, 713 crore deal that would boost  Reliance Industries' fast-growing retail business.

While this deal was settled, Amazon had put some conditions in front of Future Group. Well, in this list of conditions, the most important one was that they will not sell their stake to some of the specific companies and one of them was Reliance Industries owned by Mukesh Ambani. This is where exactly the tiff started. 

Let’s take a look at the basic structure of this deal

- Reliance acquired Future Group’s Retail warehouse, and wholesale business for Rs 24, 713 crore

- Reliance Retail’s subsidiary Reliance Fashion & Lifestyle will take a stake in Future Enterprises right after its deal through preferential share and through stock warrants.

- RRFL will acquire this stake through shares and Equity warrants.

- They will invest around 1200 crore in Future Enterprises with the help of shares for a stake of 6.09% and Rs 400 crore with the help of preferential issue of equity warrants.

- When these warrants are exercised, RRFL will be able to invest the remaining Rs 1200 crore in FEL.

- After this, Rs2800 deal stake of RRFL in Future Enterprises limited will be around 13.14%

Amazon immediately raised a question on this deal saying, how could you? Not only this, but Amazon has also expressed their resentment to SEBI ( The Securities and Exchange Board of India) requesting them to shut the deal immediately.

Amazon also has the option of approaching the higher court i.e. Supreme Court if they wish to. Here the Arbitration and Conciliation act will play a significant role. It will be difficult to figure out where exactly will this deal go.

Although Amazon tried hard to block the deal, Reliance and Future Group are still hopeful to finalise the deal. And they support each other completely in regard to this matter. 

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If we analyse the performance and past record of Future Group, they have a huge debt of Rs 13,000 crore which will be paid by Reliance Retail and eventually it will give some relief to the banks. After this deal, Reliance will surely emerge as a strong competitor for basically two E-commerce Giants, Amazon and Walmart.

During their Press Briefing, Reliance AGM has mentioned that they are already receiving interests from many Financial investments.

This deal will undoubtedly add value to the Financial performance of Reliance in the upcoming years.

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author

Madhulika