Amazon gets win in India as Reliance's Future Group deal dies
- Dan Primack, author of Axios Pro Rata
Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images
Reliance Industries of India said it cannot fully implement its $3.4 billion purchase of retailer Future Group, after Future Group's secured creditors objected.
Why it matters: It's something of a win for Amazon, which has been fighting the merger since it was announced nearly two years ago. But it's a catastrophic loss for Future Group, once India's second-largest retailer with more than 1,500 stores, which may go bankrupt.
Backstory: Amazon invested around $200 million in Future Group in 2019, which included a right of first refusal for any retail asset sales; thus sparking a legal battle when Future agreed to sell those assets to Reliance Industries.
- In short, it was concerned that a combined Reliance/Future would dominate the Indian retail market.
As the legal battle has played out, however, Reliance surprised most everyone by seizing control of hundreds of Future locations, and claimed nonpayment of rent. With the merger now dead, and those rent claims pending, it's unlikely Future can service its giant debt.
The big picture: India's retail market is projected to hit $1.3 trillion by 2024, per Forrester Research. The vast majority of that remains physical retail, where mom-and-pop shops still dominate. Amazon and Walmart-owned Flipkart dominate the country's growing, but still relatively small, e-commerce sector.
The bottom line: If Future Group does go broke, expect a fierce fight for the remaining assets.