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BREAKING: Amazon-Future Retail deal has fallen through, sources say

While the Future Group spokesperson didn't respond to a mail sent by Business Today regarding the fall out with Amazon, industry murmurs about the Amazon-Future Group deal not going anywhere are becoming stronger.

BREAKING: Amazon-Future Retail deal has fallen through, sources say

BREAKING: Amazon-Future Retail deal has fallen through, sources say

The much talked about Amazon-Future group deal has fallen through, according to sources. The former was supposed to be picking a 10 per cent stake in modern Indian retail pioneer, Kishore Biyani's Future Retail, for Rs 2,000 crore. As of last month, there was also news of Amazon wanting to negotiate a wider agreement, under which it would have the power to up its stake for a longer term period of 8-10 years.

However, on December 27, when the new e-commerce FDI policy disallowed the likes of Amazon and Flipkart to deep discount and build their private brands on their respective platforms, Biyani, surprisingly hailed the move. He said that the government's move to tighten the FDI norms was a game-changer for physical retailers like him, as it would force the e-commerce giants to be pure play marketplaces, where various brands could sell their products. While Biyani has never been a fan of the various e-commerce companies, his statement, especially at a time when he was supposed to sign on the dotted line came as a surprise. The speculation grew stronger when Future Retail's stock prices dropped by over 11 per cent soon after the announcement of the revised FDI e-commerce policy.

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While the Future Group spokesperson didn't respond to a mail sent by Business Today regarding the fall out with Amazon, industry murmurs about the Amazon-Future Group deal not going anywhere are becoming stronger. As a matter of fact the new e-commerce FDI policy, which doesn't allow Amazon to either own inventory and build brands nor deep discount, puts a question mark on many of its recent investments. The e-commerce giant along with Samara Capital had acquired Aditya Birla Retail's grocery retail business last year for Rs 4,200 crore. It had also acquired a 5 per cent stake in Shoppers Stop. The reason why Amazon would have made have these investments is to have an omni-channel presence, use the physical stores as a distribution hub and also sell its private label brands through the physical stores. But with the new policy disallowing the e-commerce major to build brands, the purpose of these physical store acquisitions could be largely defeated. "As of today, they will at the most use these physical stores to get consumer data and build the Amazon Pantry business," says a retail expert.

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He, in fact, wonders whether Amazon and Future were really going to sign on the dotted line. "When the DIPP policy was announced, Biyani was the first one to speak in favour of it. Even earlier, he was publicly denouncing the e-commerce giants and then suddenly started talking about selling minority stake." This retail expert had suspects that talks of a possible deal was a way to step up valuation.

So, as Biyani's excitement towards the new FDI policy on e-commerce has probably given away, the deal between Amazon and Future is off.

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