“India’s Supreme Court stopped regulatory approval for the Future Group’s $3.4 billion asset sale to Reliance Industries Ltd.,” Bloomberg writes.
Why It Matters: The delayed deal is a significant win for Amazon, which had been trying to “scuttle the transaction in its bid to dominate the country’s retail sector.” The case isn’t dead — the court can continue to hear arguments — but the court cannot make a final decision until it receives further orders.
- The country’s top court overturned a previous ruling in favor of Future.
- Future’s stocks and bonds dropped on the news.
What Did Amazon Argue? Back in October, Amazon “secured an interim stay” from a Singaporean arbitration tribunal on the grounds of accusations that said Future group violated “a partnership contract when it agreed to sell assets to billionaire Mukesh Ambani’s conglomerate last year.”
- The latest twist in this saga puts Future Retail in a precarious position, as it has struggled with debt and has “warned of insolvency.”
- Future could very well collapse if this deal falls through, ceding its place in the estimated $1 trillion Indian consumer retail market.
- “Amazon is unwilling to cede any competitive advantage to Reliance in the only billion-people-plus market left in the world after the American firm lost out to local rivals in China.”
The Takeaway: What happens here could become a precedent on the “validity of emergency decisions by foreign arbitrators in India.” It’s also an indicator of Amazon’s increased footprint in India — it announced this month it was also setting up manufacturing operations in the country.
- Representatives from Amazon India, Future and Reliance didn’t immediately respond to Bloomberg’s request for comment.
- Future could however move to have the Singaporean arbitration tribunal lift the interim order, weakening the court’s ruling.
This deal represents a big potential upside if Amazon can get its hooks into India. We will be watching this deal closely.