The new e-commerce norms are likely to give a blow to the deal between Indian’s biggest retail giant Future Group and global e-commerce major Amazon due to amendments in the foreign direct investment (FDI) rules.
Amazon-Future Retail deal on hold post new FDI norms
The commerce and industry ministry had tweaked the FDI rules which prohibited e-commerce companies from entering into an agreement for the exclusive sale of products and also barred them from selling products of the companies in which they have equity stakes or management control.
The Future Retail-Amazon deal if it goes through will now have to rework on their strategy for omni-channel expansion as the changes will limit Amazon from selling the former’s goods on its platform, CNBC-TV18 reported citing sources.
Amazon is currently in the final stages for an acquisition of a 9.5 percent stake in Future Retail as a foreign portfolio investor (FPI) estimated at a value of Rs 2,000 crore ($300.6 million).
Amazon had big plans with Future Retail in India as the investment would give the Seattle-based company a strong foothold in the country’s retail market. It was believed that Amazon would possibly go on to buy out the Future Group, however, with the recent amendments all plans for any acquisitions have been put on hold.
The new changes will come into effect from February 1, 2019, and both the companies are currently assessing the situation and likely to take a final call on the deal later this month.