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Future Group urges SIAC to modify order to exclude FRL


MUMBAI :
Future Group, which is locked in a legal battle with Amazon.com Inc., has asked a Singapore arbitration court to remove Future Retail Ltd (FRL) from the scope of its order that temporarily blocked the Kishore Biyani-led group from selling its assets to billionaire Mukesh Ambani.

In a modification application on 11 March, Future Group has asked the Singapore International Arbitration Centre (SIAC) to review its October interim ruling, two people with direct knowledge of the development said on condition of anonymity.

“Future Group has realized that due to the Singapore court’s order, Future Retail cannot proceed with the deal with Reliance Industries Ltd,” said one of the two people. “The group’s application seeks an interim stay on the emergency arbitration order and removal of Future Retail from the scope of the order till the final outcome is decided.”

The latest plea is an attempt by Future Group to pave the way to complete the 24,713 crore asset sale deal with Reliance Industries.

The modification application in the Singapore tribunal follows the Delhi high court upholding the validity of the arbitration court’s order.

Amazon has challenged Future Group’s asset sale to Reliance Industries on the grounds that it violated a contract that Kishore Biyani entered with Amazon for an investment in a group company.

The cash-strapped Future Group is trying to expedite the deal to pay creditors and save the Big Bazaar retail chain from collapse.

Emails sent to spokespeople for Future Group, Amazon and Reliance Industries remained unanswered.

The real battle is, however, between Amazon and Reliance over a bigger slice of the Indian retail market that is estimated to exceed $1.3 trillion by 2025.

Amazon founder Jeff Bezos has made India a key focus of its global plans. Amazon fears that access to assets of Future Retail will give rival Reliance Retail a crucial edge in the battle for dominance of the Indian market.

The Reliance Industries-Future Group deal is still to get court clearance because of Amazon’s lawsuits against Future Group.

Amazon contends that Future Group can’t sell assets to 30 specified entities, including Reliance Industries, without the US company’s consent as per a commercial agreement signed in August 2019.

Future Group, which has been caught in the battle between Bezos and Ambani, has been struggling to repay around $3 billion worth of dues to lenders.

The Reliance Industries-Future Group deal is awaiting clearances from the Supreme Court and the National Company Law Tribunal (NCLT) right now.

The case in the Supreme Court is scheduled to be heard on 19 March.

But even as the legal clearances are awaited, Reliance has extended operational support to Future Retail to prevent a deterioration in asset quality.

Reliance has also extended an internal deadline for the completion of the purchase by six months to accommodate for delays caused by the legal battle. Some of Future Retail’s lease agreements for stores have been transferred to Reliance to ease the burden on the troubled retailer and avoid defaults.

Integration of the workplaces of Reliance Retail and Future Group has also begun, and many Future Group employees have started undergoing training to work under Reliance Retail.

On 22 February, the Supreme Court directed NCLT not to approve the deal till it pronounces its final judgement.

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Future

Vistra ITCL invokes Future Retail shares


Vistra ITCL, an independent corporate trustee, has invoked shares amounting to 6.61 per cent stake in Future Retail Ltd (FRL), according to a regulatory filing by the company.

As many as 3,58,15,889 equity shares of Future Retail pledged with Vistra have been invoked on September 10 and November 24 in capacity as a debenture trustee in order to secure the debentures issued by Future Capital Investment Pvt Ltd and Future Corporate Resources Ltd, Vistra ITCL said in a letter to BSE.

A total of 6,52,32,692 shares of Future Retail Ltd aggregating to 12.03 per cent stake were pledged with Vistra, it added.

The invocation of shares comes at a time when Future Retail is locked in a legal battle with e-commerce giant Amazon, which received a favourable interim order from the Singapore International Arbitration Centre (SIAC) last month against the Kishore Biyani-led firm’s Rs 24,713 crore deal with Reliance Retail.

The arbitrator had barred FRL from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.

In August, billionaire Mukesh Ambani‘s Reliance Industries announced the acquisition of Future Group for Rs 24,713 crore to bolster its fast-growing retail business. Through the deal, Reliance was to acquire Future Retail, which owns BigBazaar that sells everything from groceries to cosmetics and apparel, and Future Lifestyle Fashions Ltd that operates fashion discount chain Brand Factory.

Last year, Amazon bought 49 per cent in one of Biyani-led Future Group’s unlisted firms — Future Coupons Ltd (FCL) — with the right to buy into the listed flagship FRL after a few years, if the government were to undo its bar on foreign ownership of multi-brand retailers.

Amazon claimed that the Future group-Reliance deal is in breach of the agreement.





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Jeff Bezos, Mukesh Ambani in battle over Future Group – business news


A vanilla commercial dispute is setting the stage for a clash between the world’s No. 1 and No. 6 richest men. But the legal wrangling is a sideshow. What Jeff Bezos and Mukesh Ambani are really fighting over is pole position in the only billion-plus-people consumer market available to both of them: India.

The ostensible battleground is a $3.4 billion deal Indian tycoon Ambani’s Reliance Industries Ltd. stitched up in August to acquire assets of debt-laden local retailer Future Group. Bezos’s Amazon.com Inc. is trying to block the transaction.

That, in itself, is a bit of a dampener. Expectations were building for the two billionaires to work together. In September, Bloomberg News reported that Ambani had given Amazon an option to buy as much as 40% of Reliance Retail Ventures Ltd., seeking to repeat the success he had earlier this year in bringing in Facebook Inc. and Alphabet Inc. as partners to his digital platform.

By seeking to stall Ambani’s purchase of Future, Bezos may be signaling that he would rather remain a rival. Or, that he’s buying time to sweeten the offer currently on the table.

The actual quarrel is only interesting when you read between the lines of the claims and counterclaims.Amazon bought a 49% stake last year in a private firm controlled by Kishore Biyani, a pioneer of modern-format retailing in the country. The investment gave the U.S. e-commerce giant the right to acquire Biyani’s shares in the publicly traded Future Retail Ltd. from the third year. Another of Bezos’s conditions was that Biyani wouldn’t sell his assets — about 1,500 stores nationwide — to restricted persons, including Reliance, which operates India’s largest retail chain.

After the Future-Reliance deal was announced, Amazon alleged breach of contract and obtained an interim stay against the sale from an arbitrator in Singapore, a preferred neutral venue in Asia for settling disputes in cross-border agreements. The U.S. company then wrote a letter to Indian stock exchanges and the regulator, asking them to not approve the transaction.

Future Retail has challenged Amazon’s position by saying that the Singapore ruling has no legal basis in India, and that anyway, it wasn’t a party to the founder’s agreement. Given the debilitating impact of the Covid-19 pandemic on operations, the retailer says it’s doing the right thing by all stakeholders in selling assets to Reliance. As for Amazon’s claim of $193 million in damages plus interest, that liability, if awarded by the arbitrator, should fall on Biyani’s private firm that did the deal, Future Retail argues.

Biyani is just a pawn in a much bigger power play. Future’s cash crunch didn’t emerge suddenly. Amazon had ample opportunity to tiptoe around India’s legal restrictions on foreign ownership of retail chains to act as a white knight. But it didn’t.

Amazon may still be interested in partnering with Ambani — at the right price. Other investors, such as Silver Lake Partners and KKR & Co., have written him checks worth $5 billion in total. They may have feared losing out on what could become India’s most successful mix of physical and digital shopping, a strategy that leverages Reliance Retail’s own outlets together with independently owned neighborhood stores connected to Ambani’s 4G phone network of 400 million users. However, the portion offered to Amazon would mean a $20 billion commitment. Bezos could afford to see how well Ambani executes his plan.

Amazon’s India website kicked off its annual festival season last month to record sales in the first couple of days. Reliance Retail’s revenue also jumped 30% in the September quarter from the previous three months. But although India’s nationwide lockdown has ended, not all stores have reopened fully. Footfall has yet to recover, especially in fashion and lifestyle and at stores inside malls. In Macquarie’s estimates, the next fiscal year’s earnings per share for Reliance Industries, the holding company, may be 23% below the consensus street forecast. A reason, the brokerage says, is stiff competition, high investment and low margins in retail. Reliance Industries shares fell 8.6% in Mumbai on Monday. 

Amazon’s letter to the Securities and Exchange Board of India makes a reference to India’s “ease of doing business,” which has been a sore point with foreign investors from Vodafone Group Plc to Cairn Energy Plc. The regulator needs to hold listed firms accountable for their dealings, Amazon said in the letter, according to Reuters, which has seen a copy.

The last thing India wants is more of a bad rap. The Seattle-based firm already has to operate with one hand tied behind its back: As a foreign e-commerce player, it can’t own inventory or openly discount merchandise. Even harsher rules — covering data and algorithms — may be on their way. It’s important for regulators to not give Amazon the chance to paint a commercial feud as another sign of India’s unfair treatment of global investors.

In more ways than one, a waiting game by Bezos may not be a bad idea. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

For more articles like this, please visit us at bloomberg.com/opinion

©2020 Bloomberg L.P.



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