The biggest rich in the world and the biggest rich in India are face to face and in the middle are 'Retail King of India' Kishore Biyani and his Big Bazaar.
Big Bazaar because it is his most famous brand. However, the deal is bigger than this and what is at stake is much bigger than that.
The richest man in the world is Jeff Bezos of Amazon. This time, he is hurt by him, he is Mukesh Ambani of Reliance, India's largest and fourth-ranked rich man in the world. The reason for the altercation between the two is Kishore Biyani and his future group.
On Sunday, Amazon issued an interim order from the Singapore International Arbitration Center that Future Group could not sell its business to Reliance Group. Before coming to the why and how, it is important to understand what this deal is.
Biyani's Future Group has signed an agreement to sell all its retail and wholesale businesses to Reliance Retail Ventures Ltd, a Reliance Group company.
In August, both companies announced that Reliance will pay about Rs 24,700 crore for this.
Future Groups of All-Big Retailers in the World
Even then, questions were being raised as to why Kishore Biyani is making such a deal, in which his favorite brand will not only sell Big Bazaar, the entire retail and wholesale business and even then the entire debt of the company or the promoter will not be able to get off.
It was not very difficult to understand this thing. The company had spent a lot of money in the last few years to set up new businesses and for this, the promoter, the Biyani family, was also pledging its shares. He hoped that soon the market would improve, earnings would increase and he would take all this debt and release the shares.
Kishore Biyani was also trying to join hands with a major retailer of the world for quite some time. He also had long talks with Walmart and many other veterans of the world. The news of his agreement with France's Carrefour was in the news 10 years ago.
In a nutshell, it can be said that all the big retailers of the world had their eyes on Future Group, because till then it was the largest retail company in the country. The management of Future Group was also realizing that in the coming times, it would need a big partner to compete with companies like Tata, Birla, and Reliance.
There was only one hitch. Foreign Investment Policy of India. Particularly, all governments have been steadfastly following foreign investment in retail trade.
Any foreign investor hesitates to invest money in an Indian company until he gets a controlling stake in the company or at least to create pressure.
The rules of retail business made it very difficult. However, foreign companies can now take up to 100 percent stake in single-brand retail and up to 51 percent in multi-brand retail, with some conditions. But its path is also not easy.
Not all companies agree to its terms. And the other big hitch is that the rules are different for online retailers ie e-commerce companies.
Even after getting this exemption, no e-commerce company can take a share above 10 percent in any retail company in India and the condition is that both these companies have online business and offline ie shop, store, warehouse, etc. I can not have any relationship.
This rule is strange, because, on the one hand, Amazon itself is doing business in India fiercely, on the other hand, Flipkart started from India has now reached the hands of Walmart. But it is still not easy for Amazon to buy part of Future Group or any other such retailer.
Amazon, the world's largest online retailer
Probably, this is why many retailers were sitting in search of their partners that as soon as the laws change, we will extend our agreement further. There was also a reason for this preparation. The World Economic Forum had predicted that by 2030 India would become the world's largest retail market after the USA, China, and China.
This year the size of the retail business of the country is around 70 billion dollars, which is expected to increase to about 1.3 million dollars in 10 years.
It is obvious that Amazon, the world's largest online retailer, wants to see a big part of this market in its bag. The expectation was also increasing that if not today then tomorrow the government will make the way for foreign investment in this business easier.
There is a big logic behind this. From businessmen to economists, this question is constantly being raised why the government does not consider the entire retail market of the country as one.
How can there be different laws for offline and online i.e. supermarket and shopping portal?
Perhaps in the same arrangement, Amazon signed a deal with Future Group. Last year, in August 2019, Amazon bought a 49 percent stake in Future Group's company Future Coupons Limited.
This company deals with gift vouchers, payment apps, etc. That is, if you buy a gift voucher from Big Bazaar or Central and give it to someone, then that voucher comes from this company.
But the big thing was that this company had about 10 percent stake in Future Retail Limited.
So in a way, Amazon understood or was told that it has now started investing in future retail and this system can be extended as soon as the rules change.
It is written in this agreement that this gives Amazon the right to buy the promoter's entire or some stake in Future Retail Limited.
For this, he was given call options. These call options could be converted into shares from the completion of three years from the date of agreement to the end of 10 years.
At the time this agreement was announced, the market also read it simply that Amazon has started buying a stake in Future Group's business through the previous route.
It should be noted that this agreement was signed in August 2019. Future Group was at that time trying to establish new formats like Food Hall, Fashion at Big Bazaar, and trying to expand its old brand Big Bazaar.
In the last six-seven years, he was busy expanding his business continuously by buying many other companies or their businesses.
Corona epidemic problem
He fulfilled the need for money in this by taking a loan. At the same time, Reliance Retail's dominance was increasing in the market and after the IPO, D-Mart was also looking to expand the business with renewed vigor.
The situation of the country is also going to improve, if such wind was blowing, then there was no risk in increasing business by taking a loan. And it was also important that the group maintain its status in this business.
Promoters were also pledging a lot of their shares to meet the loan requirement. At that time, Future Retail's stock used to be around Rs 380, but in February this year, suddenly its shares declined sharply and in a short time, it fell to below Rs 100.
If the price falls, the lending banks ask for more shares in the margin. Things happened that in a short time, almost all the shares of the promoters were mortgaged to the banks.
There is no argument as to why this decline came suddenly. There is a lot of speculation. A beer cartel or a gang of bears were trying to beat them. Or a big party wanted to force them by dropping the price. But all these are questions at the moment.
Sources reveal that despite this, the business might have managed because daily sales were so much that the cash cycle was going on. But that was about the time when Corona was attacked.
In March, the lockdown became a mountain of trouble, because now every day, the sale of goods in the store and cash from there also stopped.
Kishore Biyani said in an interview that after the ban, all the stores were closed and in the next three-four months, the company suffered a loss of seven thousand crores, which was out of tolerance.
After all, that is why the company had to decide to sell. He says that apart from this, there is no option left now.
In the Singapore Arbitration, the company's lawyer has also argued that if this deal is not done, then the company can go bankrupt.
Now the question is, why did Amazon take this quarrel to Singapore, and will the deal be struck?
Neither side is saying anything on this. Only formal statements are available. On Sunday, with instructions from Singapore, the same night there was a statement from Reliance that they are committed to complete the deal.
A similar statement also came from Future Group. Sources were quoted saying that the Future Group can challenge this interim order in the Delhi High Court, but then there was no movement.
Law experts say that the decision of the Singapore Arbitration is not directly applicable in India.
If both the parties involved in the dispute agree with it then there is no problem. But now if Future Group is not ready to stop the deal, then Amazon will have to go to any court in India to show its decision to Singapore and get it approved by Future Group and issue instructions to Reliance. If this is not done then the deal will go on.
Why did both come face to face?
According to sources, Future Group and Reliance are now waiting, instead of taking initiative, to take action if Amazon sues. This hearing can be held in the Delhi High Court because the agreement between Future and Amazon involves resolving the dispute in Delhi.
Experts think that two arguments of Future Group make its case strong. One is that Future Retail was not a party or party to the agreement with Amazon, so it has every right to sell its business. And the second is that if this deal is not done, then the Future Group could go bankrupt. This will bring trouble not only to the company but also to thousands of its employees.
Whatever will happen in the court, it will come to the fore. But the big question is, why did Mukesh Ambani and Jeff Bezos come face to face on this issue?
The answer is that this is not a case of Future Group or anyone company deal. Both of them are seeing the world's brightest market, rather Big Bazaar and they want to see it in their bag.
That is India's retail business. Reliance Retail is now the largest retail company in the country with 10,900 stores and annual sales of one lakh 30 thousand crores and this deal with Future Group will give it 1700 stores and an income of around 20 thousand crores.
But Amazon is much bigger than this. He is planning to invest six and a half-billion dollars in India. He sees the biggest challenge here from Reliance, as he not only has the largest retail network, but also an online portal like Geomart and also with a strong network like Reliance Jio.
Whereas Amazon has to rely only on online business. On the other hand, Flipkart, standing against him in the online market, has bought a stake in Aditya Birla Fashion Retail.
This is the reason why he is insisting on stopping this deal. It is discussed that in Singapore, he also proposed that if the Future Group breaks this deal, then he is also ready to take responsibility for getting a new buyer and get the deal done.
But people watching this business closely have the power to say that it is not so much. It could also be that an agreement is being reached between Amazon and Future Group.
But it may also be that Amazon wants to agree with Reliance directly and is using this deal of Future as a trump card to pressure it.
Now is a week. That is, by next Sunday the picture will be clear whose next move will be.
Earn Money From Youtube: Looking at the future, many tech companies are turning to the Metaverse.
Australia PM India Visit Australian Prime Minister Anthony Albanese will be on a tour of India fr
A total of 19 members, including seven Trinamool Congress members, were on Tuesday suspended from
Palm Oil: Palm oil prices may fall by 20 percent by September, expected to go up to $ 673 per ton
The price of palm oil, the world's most consumed oil, is expected to fall sharply. It is believed
The 17th match of IPL 2024 between Gujarat Titans and Punjab Kings was very exciting. Despite the
Mamta Banerjee was seen making momos in Darjeeling, its political meaning is interesting
West Bengal Chief Minister Mamata Banerjee is known for her unique style. Sometimes she is seen in a
Congress MP Rahul Gandhi along with party leaders and workers began his 'Bharat Jodi Yatra' on hi
The NIA has made a big disclosure about the car bomb blast outside a temple in Coimbatore, Tamil
Due to a western disturbance, the weather suddenly changed in North India on Monday. There was sn
Lalu Yadav's health has worsened. The late night he was admitted from Patna to AIIMS in Delhi. He
