Insight on Reliance – Future Group Deal

Future Group 

Kishore Biyani founded Future Group in 2013. His grandfather had a textile shop in what was then called Bombay. He followed his grandfather’s footsteps and started Pantaloon. With the help of the stock market, he got a lot of money which he used to open a huge Pantaloon store in Kolkata in 1997. 

His success grew further when he opened Big Bazaar in 2013. The shops were like the local bazaar and had a chaotic model of operation which worked well in the Indian market. By 2009, there were a 100 Big Bazaar stores in India. He started Future Group in 2013 and now there are many divisions under Future Group; these include Future Retail Limited, Future Lifestyle Fashion Limited, Future Consumer Enterprise Limited, Future Innoversity Limited, Future Supply Chains Limited, Future Brands Limited and Future Capital Holdings Limited.

Reliance Group 

Reliance Industries Limited was founded in 1973 by Dhirubhai Ambani. The company is now headed by his son Mukesh Ambani. Reliance Industries is worth over 3.8 trillion Indian rupees in financial year 2020. Reliance Industries is a very trusted brand and many MNCs have invested in companies owned by Reliance which include Jio Platforms, Reliance Retail and Mumbai Indians to name a few. The investors include top companies like Google, Silver Lake, Facebook and General Atlantic. 

Future Group’s Debt 

Kishore Biyani wanted to expand when more and in 2019, Amazon, headed by Jeff Bezoz bought 49% stake in Future Coupons which automatically gave them 3% stake in Future Group of companies. Amazon had set out some conditions before signing this deal back in 2019 and it included the condition that Future Group should not sell its assets to some specific companies and one of the companies in the list was Mukesh Ambani’s Reliance Group. 

Like Amazon, many companies had invested in Future Group and the company was in great deal of debt with hopes to expand and gain money and pay off their debts. However, COVID-19 proved to be a big blow to them and they were unable to pay their debts. Big Bazaar began losing their customers because of lockdowns and people generally preferred buying online rather than going to shops. This led to huge losses and Future Group had to take debts to pay its employees.

Reliance Deal

Reliance Trends and Reliance Retail stores have not come up in every city. They are present only in big cities. However, BigBazaar, FBB, Central and other stores belonging to Future Group are present in almost every city in India. They have more than 1700 stores all over India.

Reliance Industries agreed to buy out Future Group in a massive ₹26000 crore deal. The company also said it would clear all of Future Group’s debts. This would mean an easy job for Reliance Industries to set up its stores. Reliance is getting more than 1700 stores in one shot. 

Legal interventions 

BigBazaar’s competitors are DMart, Tata Star etc. Amazon has plans to widen its retail enterprises in India. However these plans will be futile if Reliance Industries establish their monopoly in the market. Amazon filed for arbitration at Singapore International Arbitration Centre (SIAC) who put the deal on hold. 

However, Reliance and Future argued that there is no law which enforces the judgements of international arbitration in India. Amazon filed a complaint to SEBI to stop the deal. The matter is pending in the Delhi High Court. 

Reliance Industries’ Jio took over the telecom industry forcing Vodafone and Idea to merge together and form VI. Hence, acquiring Future Group will give Reliance Industries a great advantage in the field of retail, wholesale, logistics and warehousing units. Smaller businesses will struggle to thrive amidst this giant.

However, Amazon has not shown any interest of helping out Future Group. This means that if the deal does not work in Reliance Industries’ favour, then Future Group will sink and more than 29,000 people will lose their jobs. If the deal does work out, then Reliance will add more than 1700 stores to their list and establish a monopoly in the market. Hence, this is not just a market war but also the war between the richest man in the world versus the richest Indian in the world. 

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