Future Retail (FRL) says it will continue its legal fight and will pursue all options to close its deal with Reliance Industries. The Kishore Biyani-owned firm got a big setback on Friday, when the Supreme Court ruled that Singapore’s Emergency Arbitrator Award, restraining it from going ahead with the merger with Reliance Retail, was enforceable in the country.
The ruling was a big win for e-commerce giant Amazon, which had filed the plea against the Future Retail-Reliance deal.
“FRL is advised that it has remedies available in law, which it will exercise. FRL intends to pursue all available avenues to conclude the deal to protect the interests of its stakeholders and workforce,” C.P. Toshniwal, chief financial officer of FRL, said in a letter to stock exchanges.
In August 2020, Mukesh Ambani’s Reliance Retail had announced a deal to acquire the retail and wholesale business, as well as the logistics and warehousing business from Future Group for Rs 24,713 crore.
For Ambani, the deal would add around 1,700 stores to its kitty and strengthen its leadership position in India’s organised retail industry. The deal was even more crucial for Kishore Biyani and Future Group, as debts had mounted over the years and the ability to repay them had been hit hard due to the COVID-19 pandemic.
However, the deal angered Amazon, which argued that under an earlier deal it had inked, where in it picked up a 49 per cent stake in Biyani’s Future Coupons, it had got a 3.6 per cent stake in Future Retail, and there were clauses in the deal that prohibited Future Group from selling assets to anyone else.
Amazon then dragged Future Group to an arbitration court in Singapore. The arbitration panel put the deal on hold stating that the Future-Reliance deal can’t go through until it finally decides the matter.
The Supreme Court said on Friday that the Emergency Arbitrator Award in Singapore was enforceable under Indian law.
“The fact that the amalgamation scheme will be stalled is a major setback for Future Retail. It will be interesting to see how things progress from here,” said Sonam Chandwani, managing partner, KS Legal & Associates.
Future Retail reported a consolidated net loss of Rs 3,189 crore in the year-ended March 2021, as the COVID-19 pandemic and nationwide lockdowns hit big box retailers hard. Without the Reliance deal, which would have given it the much-needed funds, it would be a struggle for Future Group to repay debts and continue to grow.
“The Arbitral Tribunal has concluded hearings on the questions (i) whether the interim award of the emergency arbitrator should continue and (ii) whether FRL is at all a party in the Arbitration proceedings. The decision of Arbitral Tribunal is awaited,” said Toshniwal.
Senior Supreme Court advocate H.P. Ranina said on a TV channel that the apex court had been consistent in upholding arbitration awards and he doesn’t see any possibility of Future and Reliance groups getting any relief from the Supreme Court.
This is a boost for Amazon, which sees India as a key growth market, and is set for a big battle with Reliance Retail for supremacy in the digital space.
“We welcome the verdict of the Honorable Supreme Court of India upholding the Emergency Arbitrator’s award. We hope that this will hasten a resolution of this dispute with Future Group,” a spokesperson for Amazon said.
Shares of the listed entities of Future Group were under pressure on Friday as investors are worried over its future. Future Retail, Future Lifestyle and Future Supply Chain Solutions all ended 10 per cent lower. Future Consumer also declined 9 per cent. Reliance Industries also ended down 2 per cent.