The move of the lenders to Future Retail to invite open bids for the debt-ridden firm, subject to court ruling, will increase the chances of Reliance Retail to take over the assets as planned, says a legal source in the know. "It is clear that the e-commerce giant Amazon cannot buy out Future's assets because of the FDI rules that restrict foreign investments in physical multi-brand retail business," says a Mumbai-based lawyer.
Reliance Retail's ₹24,500-crore takeover deal for Future assets has been delayed for more than one and a half years due to the objections raised by Amazon as it holds 49% stake in Future Coupons, the promoter entity of Future Group. Amazon argued that Future Retail violated their contract by entering into a deal with Reliance. In December, 2021, the Competition Commission of India (CCI) revoked the US giant's 2019 agreement, citing misrepresentation and suppression of details.
Future Retail has defaulted on its first repayment obligation of ₹3,495 crore in December following the one-time debt recast. Care Ratings has downgraded the retailer to default grade soon after. Future Retail owes ₹6,278 crore debt to the lenders including Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Axis Bank and IDBI Bank. Overall, the group companies owe around ₹30,000 crore to the banks.
According to lawyers, Reliance Retail will be in an advantageous position in the Future deal if bankers call for open bid as Amazon has investment restrictions in physical retail. "The delay in sell off plans will increase the risk of lenders. We need to conclude the deal at the earliest and recover the loans as the financial condition of Future group companies are deteriorating every day," says a banker. Open bidding will allow more interested parties to participate in the bid, say bankers.
The Supreme Court on Wednesday sought a response from the Future group on Amazon's plea against the January 5 order of the Delhi High Court, which stayed the ongoing arbitration proceedings in the Future-Reliance deal. A bench comprising Chief Justice N V Ramana and Justices A S Bopanna and Hima Kohli issued notices to Future Coupons Private Ltd (FCPL) and Future Retail Ltd (FRL) and said that it will hear the matter on February 23 without any adjournment.
The legal battle of Amazon and Future Group began in October 2020 after the e-commerce giant dragged the latter to arbitration at the Singapore International Arbitration Centre. The Delhi High Court division bench had stayed the Amazon-Future arbitration over the appeals filed by Future Retail and its promoters in January. Soon the Singapore International Arbitration Center (SIAC) terminated the arbitration proceedings in the dispute scheduled between January 5 and 8.
Senior advocate Gopal Subramanium is appearing for Amazon, while senior lawyers Harish Salve and Mukul Rohatgi represent Future group.
