If Reliance Industries Limited (RIL) cannot deal with Future Retail Limited (FRL) will go into liquidation. This was stated by Future Retail during a hearing in an arbitration court in Singapore on an Amazon.com petition.
Arbitration court bans Future Group-Reliance deal
Amazon.com filed a petition against Future Group and Reliance deal. The deal was stayed by the arbitration court on Sunday, ruling in favor of Amazon. In August, a deal of Rs 24,713 crore was signed between Reliance and Future Group. Under this, Future Group sold its retail, wholesale and logistics business to Reliance Retail Ventures Limited.
In August 2019, Amazon bought a 49% stake in Future Coupons. For this, Amazon had paid Rs 1,500 crore. The deal stipulated that Amazon would have the right to purchase the stake of Future Retail Limited after a period of three to 10 years. According to Amazon, one of the conditions in the deal was that Future Group would not sell its retail assets to Mukesh Ambani’s Reliance Group.
Amazon accuses Future Group of breach of agreement
Jeff Bezos’ company, Amazon, said in an arbitration court that Future Group violated the agreement by selling retail assets to Reliance. On the other hand, Future Group said in the arbitration court that if it does not deal with Reliance, then it will have to close its 1500 outlets. This will create a crisis on the jobs of about 29 thousand employees of Future Group and Vendors Firm.
Covid-19 affected many businesses
Future Group said in an arbitration court that several Indian businesses were affected by the Covid-19 epidemic. Especially, it has had an impact in the retail sector. The Future Group states that the purpose of the FRL-Reliance deal was to protect the interests of all stakeholders through fund infusion. However, sole arbitrator VK Raja said that the economic problem is not the legal basis for not following legal formalities.
FRL-Reliance deal will be completed
On the other hand, Future Group says the deal with Reliance Retail is in line with Indian laws. The company said that it was not a party to the agreement under which Amazon initiated arbitration proceedings. The company said that it would take all reasonable steps to ensure that the proposed transaction proceeded without any delay. At the same time, Reliance Retail Ventures Limited said in a statement that it has entered into the transaction for the acquisition of the assets and business of Future Retail Limited under proper legal advice and the rights and obligations are fully enforceable under Indian law.
The situation will be clear with the final decision
VK Raja, the sole arbitrator of the arbitration court, has asked the deal to be stopped at the moment. Raja says that the deal cannot be completed until the arbitrator’s final decision in the matter is reached. Now a three-member arbitration bench will be set up to take a final decision in the matter. This bench will take a final decision in 90 days. The bench will have one nominated member each from Future and Amazon. One member will be neutral.
Amazon wants to strengthen its hold in India
Reliance is eyeing the online retail space in India, led by Amazon and Flipkart. At the same time, Amazon is working to strengthen its hold in the offline retail business due to its strong online presence in India. For this, Amazon acquired the supermarket chain of Aditya Birla Group in 2018 along with private equity fund Samara Capital. Experts say that this deal between Amazon, RIL and Future Group has been worried. Because this can give a tough competition to the company in India.
Reliance is playing a big bet in retail
At present, Reliance Retail runs around 12,000 stores in the country and Mukesh Ambani is playing big bets on retail. The equity valuation of Reliance Retail currently stands at Rs 4.28 lakh crore. Constant stake is being sold in it. So far, around 8 companies have invested in it. Mukesh Ambani has so far raised 37 thousand crores by selling its stake. Reliance Retail is also doing digital delivery with Geomart.