The latest round of retail leadership war between Amazon and Reliance is being fought in the courts between Amazon and the Future Group. Amazon has its reasons for holding up the RRIL / Future Group deal, but for the Future group, time may be really running out.
Looks like a prolonged war
Clearly, there does not appear to be any easy resolution. Amazon wants the deal to be shelved as it was not given the right of first refusal. Obviously, Amazon has a solid case, otherwise the tribunal would not have ruled in their favor. The Future group is confident, but it cannot really expect much help from Reliance as this pertains to a deal that Reliance is not privy to. That will have to be fought between Amazon and Future and could drag on. That is the real problem.
For Amazon, it is war by proxy
Amazon appears to be keen on dragging the case for as long as is legally feasible as it wants to stall the deal at all costs. Amazon realizes that the merger deal would give Reliance the complete brick and mortar support system which will become an invaluable asset when it comes to fulfilment. Current FDI rules do not permit an Amazon or Wal-Mart to buy a major stake in a retail venture so the closest they can get is to delay the deal to the extent possible. Above all, Amazon also realizes that the longer it is delayed, the less likely it is to work.
Banks are getting jittery
Just last week, the consortium of banks led by SBI had asked the Future group to, at least, pay part of the outstanding loans. Future group owes Rs.150 billion to banks and they are now increasingly getting jittery about the deal. The worry for the banks is that if the deal is further delayed and Reliance opts out of the deal then these banks may have no choice but to write off their entire loan outstanding. It is to avoid this kind of a scenario that the banks are insisting on one of the options. The banks are open to a partial payment to reduce their risk. Secondly, they are even OK to work out a restructuring plan for the loans.
Time running out for Biyanis
The biggest problem for the Future group in general and the Biyanis in particular is time. Irrespective of the outcome of the legal battle with Amazon the Biyanis do not have the luxury of holding on for too long. There are three risks for the Future group. Firstly, if the case drags on for too long then Reliance may start exploring other options. That is something the Biyanis cannot afford at this point. Secondly, the longer this stalemate continues, the more pressure is likely to build up from the banks and other creditors of the Future group. Last but not the least, the economics of the deal could change if the Tatas manage to launch their Super App by then. For the Biyanis, it is a race against time.