Future Group’s retail operations may struggle after India’s top court stalls RIL deal

Photo: Reuters

The Supreme Court’s Friday ruling, which said that Singapore’s Emergency Arbitrator’s (EA) award is enforceable in India, is a huge setback for debt-laden Future Group.

Its retail operations have struggled in the aftermath of the COVID-19 led lockdowns that caused large stores to shutter for long durations, impacting sales at the company’s popular retail chains such as Big Bazaar, Nilgiris, Fashion at Big Bazaar, among others.

Legal experts said SC’s judgment poses new hurdles for Future Group’s plan to sell its retail, wholesale and other assets to Reliance Industries Ltd for 24,713 crore. The acquisition would have given Reliance an edge in India’s retail market that is set to touch $1 trillion in 2025.

“So, the more important question here is that how progressive the judgement of the Supreme Court is for arbitration. RIL and Future Retail will most definitely want to file a review of the judgement,” said Sameer Jain, managing partner, PSL Advocates & Solicitors.

Debt-laden Future Group has been entangled in a bitter legal battle with Amazon over its proposed deal with RIL, which entails selling Future Group’s retail, wholesale, logistics and warehousing assets to two RIL subsidiaries to repay the group’s lenders.

The deal would have also helped Reliance expand its clout in the grocery and fashion retail market, where it has already built a sizable business.

“At least from the reporting of the judgement, there is a direction of upholding the Emergency Arbitration award. So, by implication, that would also mean that the Reliance and Future Retail deal would be stalled. So at least we foresee that there is a hurdle for the deal to go ahead unless this is appealed by Future Retail and there is a review to this deal,” said Jayashree Parihar, senior associate, PSL Advocates & Solicitors.

The disputing parties could also seek an out-of-court resolution, Jain said. “All three parties can always sit together and say that they have mutually decided,” he said.

In August 2020, RIL Reliance Retail Ventures Ltd, a unit of Reliance Industries Ltd said it will acquire the retail and wholesale business and the logistics and warehousing business from the Future Group as going concerns on a slump sale basis.

Meanwhile, in a petition, Amazon argued that the deal violated its investment agreement with Future Group that barred the company from selling its retail assets to Mukesh Ambani’s conglomerate, among other specified entities without Amazon’s consent.

Amazon indirectly owns about 3.5% in Future Retail after buying 49% of Future Coupons for 1,500 crore in August 2019. The company has argued that the 2019 deal prevents Future Group from selling shares of Future Retail to rivals in the retail space.

The article was first published on livemint.com.

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.