India’s biggest retailer Reliance has privately defended an abrupt takeover of the businesses of debt-ridden competitor Future Retail, saying soaring fees of $634 million have forced it to act beyond expectations, a company letter shows.
The acquisition was part of a race for dominance in a $900 billion retail sector that sparked a bitter dispute in which India’s Supreme Court will decide whether Reliance or Amazon.com Inc. can take over Future’s assets.
The March 8 letter, seen by Reuters, reveals for the first time Reliance’s stance on the events of the night of February 25, when employees at many of the competitor’s stores suddenly appeared to take control of defaulted rent payments.
The move not only stunned Future, but also Amazon, which has claimed breach of certain contracts to legally block a $3.4 billion deal between the two Indian giants since 2020.
In the letter, Reliance said it had “gone far and truly beyond what could be expected” to protect Future “from harm” as it took “significant steps” to ensure business continuity at Future and ensure that it “no disability” existed. to their deal.
These moves included ₹48 billion (US$634 million) in financial assistance, which included ₹11 billion in unpaid lease rents and ₹37 billion in working capital.
For months, Reliance had leased more than 900 of Future’s 1,500 stores and continued to allow the company to operate them.
When Future proved unable to pay outstanding fees and losses at its retail businesses mounted, Reliance faced “compelling circumstances” and decided to exercise its statutory right to take over the businesses, the letter added.
Neither Reliance nor Future immediately responded to a request for comment.
Future, which is staring at bankruptcy amid mounting losses, has previously described Reliance’s move as “drastic and one-sided”.
Before Amazon blocked it, Reliance, led by India’s richest man Mukesh Ambani, had proposed a $3.4 billion deal to buy Future’s retail, wholesale and logistics operations and a few other businesses.
But after Reliance’s abrupt takeover of its businesses, Future sought several reassurances in a March 2 letter, also seen by Reuters, asking if Reliance would stick with the deal without changing its value or terms.
In its March 8 response, Reliance said Future’s request for assurances must be viewed “in the light of rapidly evolving circumstances.”
It added: “Once the scheme (the deal) is implemented, it will meet its terms.”