Mukesh Ambani
Mukesh Ambani has got a lot more riding than just picking up a stake in Future Group, which has extensive interests in India's retail sector. His main aim will be to counter Amazon with any such purchase. Image Credit: Agency

Mumbai: Reliance Industries is closing in on a deal that would see it acquire stakes in some units of India's retail-focussed Future Group -, a move that would bolster the e-commerce ambitions of the conglomerate and its billionaire Chairman Mukesh Ambani.

Investment from Reliance, India's most valuable company, would help Future's founder Kishore Biyani pare debt, even if it risks the tie-up with the US online shopping giant announced by the Mumbai-based company a few months ago.

An agreement between Ambani's Reliance and Future, which already has a partnership with Inc., could be announced as early as next month. Though unit Future Retail Ltd. has attracted suitors, including Amazon, Reliance's offer to buy into the group's holding company is likely to sway the outcome in its favor.

The Future Group has five main listed units including Future Consumer Ltd., which sells food, home and personal care products, and Future Lifestyle Fashions Ltd. that operates fashion discount chain Brand Factory. 

A successful deal may draw the battle lines between Amazon and Ambani, who just secured almost $14 billion for his e-commerce venture Jio Platforms Ltd. from investors including Facebook Inc. Amazon has made the nascent Indian market, with its 1.3 billion consumers, a key focus of its global expansion.

All out war

The talks involving Future Group are part of the intensifying war to win over the Indian shopper - both online and in physical stores. Amazon has already pledged to invest $5.5 billion in the country, while Walmart Inc. spent $16 billion to buy local e-commerce leader Flipkart Online Services Pvt. in 2018.

In August, Amazon agreed to purchase 49 per cent of one of Future Group's unlisted firms, allowing it to buy into Future Retail after a period of between three and 10 years. The two deepened that partnership in January, with Amazon becoming the authorized online sales channel for Future Retail's stores that sell everything from groceries to cosmetics and apparel.

Amazon, which holds an indirect stake of 1.3 per cent in Future Retail as a result of purchasing 49 per cent of Future Coupons Ltd., will continue to retain that stake and also the right to raise its holdings to a certain extent. As recently as May, Amazon was considering adding to its investment in Future Retail for a holding of as much as 49 per cent.

Pledging shares

After racking up debt, Biyani's family had been negotiating with creditors to sell shares in several group companies. A stock meltdown sparked by the coronavirus pandemic eroded the value of the family holdings, resulting in a breach of some covenants on loans raised against shares. By agreeing to invest in the holding company, Reliance may have an edge over rival suitors.

The holding firm, through which Biyani's family owns its stake in the units, owes lenders including Apollo Global Management Inc., Blackstone Group Inc. and UBS Group AG. The listed entities have debt of about 100 billion rupees ($1.3 billion), while the amount is similar for the holding vehicles of the family.