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In a blow to Kishore Biyani’s plans to keep Future Retail afloat, the Supreme Court on Friday ruled in favour of Amazon by upholding the Singapore International Arbitration Centre’s award against the proposed ₹24,713-crore merger deal between Future Retail Limited and Reliance Retail.
The decision effectively halts Biyani’s plans to pay the group’s mounting debt and salvage at least some part of the business. For the fiscal ended 2021, the Future Group made a loss of ₹5,943 crore and the total debt was up by 7 per cent at ₹20,742 crore. The company has defaulted on payments several times and the lenders, who had recently agreed to restructure the debt, are now worried about the future.
“This is a major setback for Future Retail,” said Arvind Singhal - Chairman and Managing Director, Technopak. “It desperately needed Reliance as a White Knight to bail it out and provide substantial financial recovery to the lenders.”
Future Retail had entered into an agreement with Reliance Retail in August 2020 but this was objected to by Amazon, which had , in 2019, acquired a 49 per cent stake in Future Coupons that holds a 7.3 per cent stake in Future Retail. This deal gave Amazon an indirect stake of 3.58 per cent in Future Retail.
Will pursue all avenues to conclude deal with Reliance: Future
SIAC stays the deal
According to Amazon, there was an agreement with Future that it will not sell stake to Reliance Industries. After the Future-Reliance deal was announced, Amazon filed a petition with the Singapore International Arbitration Centre. In October, SIAC stayed the deal, in an interim award.
On Friday, a Bench of Justices Rohinton F. Nariman and B.R. Gavai upheld the validity and enforceability of the Singapore-based Emergency Arbitrator award.
According to experts, Future Retail is likely to face a major liquidity crisis in the near future. This has clearly made investors jittery. On Friday, Future Retail’s shares remained locked in the 10 per cent lower circuit through the day. . “Future Retail intends to pursue all available avenues to conclude the deal (with Reliance) to protect the interests of its stakeholders and workforce,” the company said in a statement. “The (SC) judgment addresses two limited points related to the enforceability of the Emergency Arbitrator’s order and not the merits of the disputes,” it added.
Amazon hails the verdict
Amazon, expectedly, welcomed the verdict. “We hope that this will hasten a resolution of this dispute with the Future Group,” said a spokesperson for the e-commerce giant.
According to Anuj Kapoor, Assistant Professor of Marketing at IIM-Ahmedabad, “This decision will instil confidence in the international players signalling them reaffirming that their rights would be protected on Indian soil and therefore, would have a long-term impact on future investments, especially involving foreign players.”
But the key question is how long Biyani will be able to wait for the money from Reliance to flow into Future Retail. A loan restructuring plan has already been put in place by the lenders to the Future Group companies. “With myriad legal and restructuring options available with Future, it’s too early to predict Future's demise,” Kapoor said.
Apex court holds judgment on Amazon’s plea against Future Retail-Reliance deal
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