Amazon has sent a legal notice to Future Retail, India’s second largest retail chain, for breaching the terms of its contract by selling a significant portion of the business to Ambani’s Reliance Retail.
Last year, Amazon acquired a 49% stake in Future Coupons, a group entity owned by Future Group’s retail business. The deal gave Amazon a 3.58% stake in Future Retail, and the right of first refusal to purchase more stake in Future Retail both directly as well as via entities, Future Group said in a filing at the time.
According to TV network ET Now, which first reported about the legal notice, the deal between Amazon and Future Retail also restricted the Indian firm from entering into a deal with certain firms.
Future Group, which kickstarted its journey as a stonewashed-fabric seller in the 1980s, served millions of customers through more than 1,500 stores in more than 400 cities as of earlier this year.
The legal notice has puzzled many in India, as Amazon is reportedly preparing to acquire a multi-billion-dollar stake in Reliance Retail, India’s largest retail chain, according to earlier reports by ET Now and Bloomberg.
With e-commerce commanding only between 3 -7% of all retail sales in India — and Reliance Retail launching its own e-commerce business to fight Amazon and Flipkart — Amazon’s deal with Reliance Retail is seen by many industry analysts as crucial for the American e-commerce firm’s future in India. Amazon, which kickstarted its journey in India seven years ago, has invested more than $6.5 billion in its local business in the country.
Amazon confirmed that it had filed a legal notice. Reliance Retail and Future Group did not comment. As of Wednesday midnight (local time), Future Group had not disclosed the notice on the stock exchange.
Founded in 2006, Reliance Retail serves more than 3.5 million customers each week (as of early this year) through its nearly 12,000 physical stores in more than 6,500 cities and towns in the country.
The retail chain, run by India’s richest man, Mukesh Ambani, has raised about $5.14 billion by selling about an 8.5% stake in its business to Silver Lake, Singapore’s GIC, General Atlantic and others in the past four weeks.
Ambani’s other venture, Jio Platforms, this year raised over $20 billion from more than a dozen marquee investors, including Google and Facebook.