- Amazon India has yet to make a profit.
- The company wants the Future Group, Reliance Industries deal blocked.
- Amazon is looking to attach Future CEO Biyani’s assets in its litigation.
Online retail giant, Amazon, is currently embroiled in a court battle with Future Group. The American e-commerce giant has filed a court injunction preventing Future Group from selling its assets to Reliance Industries. Amazon alleges that the Indian conglomerate broke an agreement by attempting to sell its assets to Reliance.
Future Group CEO, Kishore Biyani, has also been enjoined in the lawsuit. Amazon is presently a minority stake in Future Group. It has already invested over $100 million in the Future Group Coupons, a rewards card for Future Retail ventures.
According to its deal with the firm, no sale of assets should be made to “restricted persons” or companies, which include Reliance.
Future made the decision to sell its assets in August last year. The move was approved by Indian stock exchanges a few days ago. Future Group is looking to transfer its retail, wholesale, and logistics business to Reliance for the sum of $3.38 billion, which includes debt.
Reliance is one of India’s most successful companies. It is also the biggest in terms of market capitalization. Its 2020 revenues surpassed those of the Indian Oil Corporation, allowing it to reach a $200 billion market capitalization.
The international conglomerate is looking to grow its retail market share in India, a move that would see it have a controlling market share of the lucrative Indian grocery market. The segment is forecasted to grow by approximately $740 billion a year by the year 2024.
Amazon has asked the High Court in New Delhi to uphold the decision made by its Singapore arbitrator, who was involved in the Amazon–Future agreement. The two companies had reportedly agreed to use the arbitrator in the event of disputes.
The problem is that deals made in Singapore do not have substantial legal bearing in India. Amazon wants CEO Biyani incarcerated and his assets attached in the litigation process for breaking its business pact. This is to prevent them from being liquidated or transferred as the case drags on.
Amazon is Having Difficulties in India
Amazon has, over the past few years, invested over $4 billion in its Indian division. Amazon CEO Jeff Bezos had initially expressed optimism about the venture but the company has yet to make a profit, seven years since its foray into the Indian market.
Among the main reasons for the fluttering growth is India’s long-entrenched tradition of supporting its own industries, a factor that has made it very hard for foreign companies to flourish.
There are also complex regulatory guidelines that e-commerce companies need to skirt. While India has impressive mobile penetration, with over 600 million users, regulations have made it hard for online companies such as Amazon to hold inventory. They are simply not allowed to own the goods that they display on their platforms.
This has forced Amazon and others to use a maze of local firms as points of sale. Lately, Amazon has been able to solve this problem by buying shares in local retail firms. The only problem is that the Indian government is cracking down on such practices.
In some instances, the investments have been done indirectly by buying shares in the parent companies but regulators are moving to seal this loophole.