Future Group, Amazon continue to lock horns: Here's what's new

Continuing their letter fight, Amazon and Future Group have written to market regulator SEBI with contrasting requests over a ₹24,713 crore buyout of assets of India's second-largest retailer.

Future Group has requested SEBI to expedite the review of the proposed deal and issue a no-objection certificate, while Amazon has urged that the review of the "impugned transaction" be suspended.

Amazon had dragged Future Group to arbitration at Singapore International Arbitration Centre (SIAC) after an indebted Kishore Biyani group firm signed a pact to sell retail, wholesale, logistics and warehousing units to billionaire Mukesh Ambani's Reliance in August this year.

Future Group firm Future Retail Ltd (FRL) approached the Delhi High Court, which earlier this month upheld Amazon's right to make representations to statutory authorities against the Future Group-Reliance Retail deal.

However, the court also made several observations indicating that Amazon's attempt to control FRL through a conflation of agreements it has with an unlisted unit of the Indian company will be violative of the FEMA FDI rules.

The court had also given a go-ahead to the regulatory authorities to decide about the deal in accordance with the rules and regulations.

In its letter, dated December 23, FRL requested SEBI to decide over the NOC (No Objection Certificate) required for the sale of its retail and other businesses "as soon as possible" as any delay would cause loss to the company, its stakeholders and investors.

"In view of the judgment of the Delhi High Court, it is respectfully prayed that SEBI reviews the application submitted for its NOC/ observations on the scheme to the stock exchanges as soon as possible as any further delay on this count would cause irreparable loss not only to FRL and its stakeholders, including lakhs of small investors, but also to other entities and their respective stakeholders and investors, who are involved in the scheme," it said.

The Securities and Exchange Board of India (SEBI) has to issue an NOC after reviewing the scheme of merger of FRL along with other Future Group companies with RIL's Reliance Retail Ventures Ltd and Reliance Retail Fashion Lifestyle Ltd.

In its letter to SEBI Chairman Ajay Tyagi on December 21, Amazon said FRL's request for an injunction against Amazon has been rejected by the Delhi High Court, and that the court has held that the interim award by SIAC is valid under Indian law.

"As the interim award is valid under Indian law, it is respectfully submitted that SEBI should decline to approve the impugned transaction on the basis of the findings and directions contained in the interim award," it said in the letter.

Amazon added that all findings contained in the Interim Award, including the finding that FRL is a necessary and proper party to the arbitration proceedings, "continue to be valid".

"The arbitration proceedings thus continue, including against FRL," Amazon said.

This is the fifth instance of Amazon writing to SEBI on this matter.

It also urged SEBI to suspend review of the impugned transaction as well as the scheme involving the said transaction, and not grant any no-objection in this matter.

Further, Amazon asked SEBI to direct Indian stock exchanges not to issue any no-objection/ approval letter to FRL.

E-mails sent to Amazon and Future Group did not elicit a response.

About Amazon's claims, Future Group said that prima-facie findings in the judgment, the contention of Amazon that its consent is required for FRL to undertake the Scheme is incorrect and misplaced.

"If credence is given to Amazon's interpretation, it would lead to illegality and render the agreements unlawful," it said adding "Amazon's interference, on the basis of the above incorrect representation is a civil wrong committed against FRL and Reliance. Hence, SEBI cannot take cognizance of this".

Further, it said that FRL did not challenge the EA (Emergency Arbitrator) order in the suit, only the legitimacy of the EA was an issue.

In 2019, Amazon had agreed to purchase 49 per cent stake in one of Future's unlisted firm -- Future Coupons Ltd -- with the right to buy into flagship FRL after a period of three to ten years. Future Coupons holds 7.3 per cent equity in FRL -- that operates popular supermarket and hypermarket chains such as Big Bazaar -- through convertible warrants.

Amazon, Reliance and Walmart Inc's Flipkart are locked in a battle to gain market share in India, where millions of middle-class customers are newly adopting online purchases of food and groceries due to the COVID-19 pandemic.

The booming e-commerce market in the country will be worth USD 86 billion by 2024, according to research firm Forrester.

The stakes are particularly high for Amazon, which believes India is a big growth market after shutting its online store in China last year.