'The shops are gone': How Reliance stunned Amazon in battle for India's Future Retail

Future Retail

06/03/2022 07:24

* Reliance began stealth seizure of Future stores on Feb. 25
    * Much of Future management was in the dark about
takeover-sources
    * Reliance to rebrand stores, keep Future employees on
-sources 
    * After takeover of stores, Amazon and Future to commence
talks 

    By Aditya Kalra and Abhirup Roy
    MUMBAI, March 6 (Reuters) - At a large Future Retail
 FRTL.NS  supermarket in Mumbai last week, workers were
unloading hundreds of bright blue grocery crates belonging to
India's biggest retailer Reliance.
    Prospective customers were turned back by security,
disappointed at the closed state of the store that still carries
the signage of Future's biggest brand, Big Bazaar, but which
will likely soon be rebranded as a Reliance outlet.
    Across India, similar scenes are being played out as
Reliance Industries  RELI.NS , India's biggest conglomerate run
by Mukesh Ambani, the country's richest man, presses ahead with
a shock de facto takeover of prized retail real estate that
Amazon.com Inc  AMZN.O  has been keen to take part-ownership of.
    The high-profile bitter dispute between corporate titans in
which Amazon has sought to block Reliance's planned $3.4 billion
purchase of Future Group's retail assets is currently before
India's Supreme Court.
    Reliance's takeover began with utmost stealth on the night
of Feb. 25 when its staff began arriving at Future stores. Many
in Future's management were in the dark about the plans as store
employees from all over the country frantically began to call,
according to people with direct knowledge of the matter.
    "It was tense, everybody was panicking. We didn't know who
they were. They wanted access and seniors didn't know about it,"
a New Delhi Big Bazaar store employee said, describing what
happened around 8 p.m. that day.
    At a Future store in Sonipat town in northern Haryana state,
announcements were made asking customers to leave as Reliance
seized control, one source said. In Vadodara in western Gujarat,
Future employees arriving for work the next morning were asked
to go back home with no explanation, said another source.
    Citing unpaid payments by Future, Reliance has taken control
of operations of some 200 Big Bazaar stores and has plans to
seize another 250 of Future's retail outlets. Combined, they
represent the crown jewels of Future's retail network and around
a third of all Future outlets.  urn:newsml:reuters.com:*:nL4N2V31V6
    Although Reliance had not played a large public role in the
legal dispute, it had, according to sources, for some months
assumed many of the leases held by cash-strapped Future, India's
No. 2 retailer and Amazon's estranged business partner.
    Reliance's sudden possession of the stores appears to have
landed what some analysts are calling a coup de grace that
spoils Amazon's chances of untangling the transfer of Future's
assets to Reliance. That's despite a series of legal battles won
by the U.S. e-commerce giant to date blocking the 2020 deal
announced between the two Indian companies. 
    "What will Amazon fight for now?" said a source close to the
U.S. company with knowledge of the legal dispute. "The shops are
gone."
    Representatives for Reliance, Amazon and Future did not
respond to Reuters queries for this article. Sources asked not
to be identified due to the sensitive nature of the dispute.
    
    AFTER THE TAKEOVER, TALKS
    Future Retail said on Feb. 26 it was "scaling down its
operations" to cut losses although it made no mention of
Reliance in its statement. Future Group as a whole has more than
$4 billion in debt.
    Reliance plans to retain Future's employees at the stores it
takes over, sources have said.
    Amazon, which has a stake in a separate Future Group unit
that it argues prevents Future from selling retail assets
without its permission, has called the supermarkets and other
stores an "irreplaceable" network in a sector worth $900 billion
in revenues annually.
    The legal wrangles had over time become increasingly
high-stakes and marked by ugly rhetoric. At one point, Amazon
sought for Future Chief Executive Kishore Biyani to be detained
in prison for disobeying a legal order. And Future once likened
Amazon to Alexander the Great and his "ruthless ambition to
scorch the earth". 
    But on Thursday, six days after Reliance's move, Amazon at a
Supreme Court hearing unexpectedly called for cordial talks to
end the dispute - a proposal Future agreed to.
    "People have taken over shops ... let's at least have a
conversation," Amazon's lawyer Gopal Subramanium said. 
    Discussions are expected to begin soon.  urn:newsml:reuters.com:*:nL1N2V60G8 
    Whatever the outcome of the talks, analysts say Amazon had
gravely underestimated Reliance.
    "If anybody should have seen this coming, it should have
been Amazon and they should have prepared against it," said
Devangshu Dutta of retail consultancy Third Eyesight. 
    "Clearly, they didn't." 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
ANALYSIS-Battle of the billionaires: Bezos, Ambani gun for India
retail supremacy    https://reut.rs/2KJpvXn
FACTBOX-India retail: A nearly $900 bln market dominated by
mom-and-pop stores      urn:newsml:reuters.com:*:nL4N2LG2CQ
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Aditya Kalra in New Delhi and Abhirup Roy in
Mumbai; Additional reporting by Francis Mascarenhas in Mumbai
and Amit Dave in Ahemedabad; Editing by Edwina Gibbs)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))