# RanchiMall Content Collaboration Output

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Future Group and its Subsidiaries

Future Group is a massive multinational-industry-company that includes an immense number of diversified businesses. The simple idea behind the business is ‘Rewrite Rules, Retain Values. It is an aggregate of various business entities operative in numerous industries under one corporate group. It is the second-largest leading retail chain company of Asian Nation, headquartered in Mumbai, Maharashtra, India. Future Group works with a wide portfolio of brands in food, FMCG, and Fashion. It is known for offering a wide range of noticeably high-quality products in Indian retail, fashion, electronics, pharmacy with famous market chains like Big Bazaar and Food Bazaar, fashion stores like Brand Factory, Central, and so on. The founder and CEO of the Future Group is Kishore Biyani. Future Group currently has a group of seven members including Kishore Biyani. The other six members are Directors and Managing Directors of Future Group, namely Kailash Bhatia, Vivek Biyani, Sunil Biyani, Vijay Biyani, Rakesh Biyani, and Sumit Dabriwala. Future Retail Limited (Ltd) of India is a leading multi-format retailer which operates some of India’s most well-liked retail chains. It facilitated in well-built trust through its innovative offers and quality products at affordable prices that help customers to attain a top-quality life. The Future Retail tends to serve stuff to millions of customers in more than 400 cities in every state of the country through digital platforms and conjointly over the 1500 stores that cover 16 million square feet of retail space. There are various divisions of Future Group such as Future Retail Limited, Future Lifestyle Fashions Limited, Future Supply Chains Limited, Future Brands Limited, and many more. Future Retail Limited and Future Lifestyle Fashion Limited of Future Group, are among the top retail organisations recorded in BSE concerning resources and in NSE as for market capitalisation. The entire workings of the Future Group are run through its different working organisations. The Retail division of Future Group which is Future Retail Limited handles supermarket store and hypermarket chains of Big Bazaar, FBB, Food Bazaar, Food Hall, Hometown, etc. Style and garments outlets like Brand Factory, Central, and Planet Sports are worked by another of its derivatives, ‘Future Lifestyle Fashions Limited’. Furniture is retailed through HomeTown stores in major cities, areas and on the web. The group additionally promotes its sports brands like Indigo Nation, Spalding, Lombard, Bare, and so on, and FMCGs like Tasty Treat, Fresh and Pure, Clean Mate, Ektaa, Premium Harvest, Sach, etc. Mukesh Ambani, the CEO of Reliance company, declared its acquisition over the significant portion of the business of Future Group in late August. Future Group revealed the constant frame that it was selling its retail and wholesale business, additionally its logistics and warehousing business to Reliance Retail for $3.4 billion. However, the problematic scenario occurs afterwards when Amazon claims that they and Future Group conjointly had a deal and Future Group has violated their terms. Last year, Amazon acquired a 49% stake in Future Coupons, a group entity owned by Future Group’s retail business, and holds a 7.3% stake in Future Retail Ltd. The deal gave Amazon a 3.58% stake in Future Retail and the right to initial refusal of purchase, additional stake in Future Retail both directly and via entities. Amazon objected to the Reliance-Future deal by sending a legal notice to the Future Group. According to ET News, this deal breached the terms of the contract with Future Group, where Amazon recorded around 30 organisations including Reliance with whom the Future Group cannot enter into any deal without its consent.

Understanding the business

Let’s dig deeper into the conflict between these two dynamic conglomerates, to bring more transparency to this current dispute. For that purpose, let’s try to understand when, how and why, this agreement took place between Amazon and Future Group. Also, how Reliance managed to come into this picture. In August 2019, the promoters of Future Group entered into an agreement with Amazon. As per the arrangement, Amazon bought a 49 per cent stake in Future Coupons and was granted a call option too. This option permits Amazon to earn all or a few portions of the promoter’s shareholding in Future Retail if authorised by law. This call option is exercisable between the third and tenth years of its term period. It was expected that Future Group will use these funds from Amazon to cut debt. According to the estimation of December 2019, the debt was estimated to range from about Rs 3,000 – 3,500 crores. It was said to be a viable opportunity for the Future Group, including Future Retail to join hands with Amazon. As its collaboration with Amazon will lead to a more online presence, with Amazon selling Future Group’s products in their e-commerce platforms. At the same time, Future Retail, which includes major chain retail shops like Big Bazaar, FBB, Foodhall, Easyday Club and Heritage Fresh, will be benefited with this merger as well. Finally, considering all those things, Future Coupons, a promoter group entity of Future Retail, received Rs 1,500 crore from Amazon in exchange for a 49 percent stake in the company along with voting rights and non-voting share of FCPL (Future Coupon Pvt Ltd). With the legal approval of CCI (The Competition Commission of India), Amazon acquired a 49 per cent stake in Future Coupons in November 2019. Future Coupons owns a 7.3 percent stake in Future Retail which also means Amazon will adequately secure 3.58 percent indirectly in Future Retail. However, on Wednesday 28th October 2020, Amazon sent a legal notice to Future Coupon, alleging that Future Group has breached the terms of its contract by signing a deal with Mukesh Ambani's Reliance Industries. According to ET News, the contract arrangement consisted of a “restricted list” of companies Future Group was prohibited to enter deals with and Reliance was believed to be one of them. In August, a Reliance Industries subsidiary said it would procure the retail and wholesale business along with the logistics and warehousing business of the Future Group in a deal estimated at $3.38 billion. The retail and wholesale undertaking of Future Group will be shifted to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly-owned subsidiary of RRVL (Reliance Retail Ventures Limited). At the same time, the warehousing and logistics business undertaking will be transferred to RRVL directly. Reliance Retail will take over all of the Future Group's key booming businesses established and owned by Biyani, who was once known as the “Retail King of India.” Reliance’s motive was to relieve Biyani from his companies’ heavy debts and liabilities, which originally urged the deal for the Future Group. It was not the first time Biyani has been compelled to sell off his companies to salvage heavy debt. On 30 September 2019, debt at Future Group’s listed undertakings estimated at ₹12,778 crores. Previously, in the year 2012, Future Group was wrestling with an identically heavy debt of ₹12,000 crores, forcing to sell their most profitable asset Pantaloons Retail to Aditya Birla group for ₹1,600 crores. Biyani was also pushed to sell off Future Capital to Warburg Pincus for ₹4,250 crores. So, this merger between Reliance and Future Group is going to be a win-win for both from different aspects. Where one company’s goal is to salvage its debts and another is planning to strengthen itself as a strong competitor in the retail sector.

Claims made by Amazon

The contract of the company Future Coupons shared crossroads between the world's richest man Jeff Bezos and Asia's richest man Mukesh Ambani. The e-commerce giant Amazon laid claim to the Future Coupons for signing a contract with Reliance without its approval. The Future Coupons is a part of the Future Group company owned by Kishore Bayani. The company is presently immersed in huge debts. Amazon bought 49% stakes of the Future Group previously. Currently, Reliance declared it is going to buy the stakes of Future Retail, again a part of the Future Group. Amazon significantly raised objections by sending a legal notice to Future Coupons for violating the terms of the contract and selling the retail assets to Reliance Industries. Amazon claimed that Future Groups infringed the terms of the agreement by selling a significant part of its business to Reliance Retail. It also claimed the deal also violated the non-compete clause and right-of-first-refusal. Amazon said it received no prior information about the deal and the Future Group should have passed the information to it before agreeing on any sale to the third party. Further, Amazon also addressed the copy of the notice to relevant authorities, which include market regulators, SEBI and the stock exchanges. The previous deal anyhow gives Amazon the right to acquire the entire or half of the shares of the Future Retail promoters. The subject of the law accords this is applicable after 3 years of the deal, and before 10 years, under episodic circumstances. The share price of Future Retail has gradually declined to around Rs.400 when Amazon signed the deal the previous year to Rs.88 while caging the trade on October 7, 2020. A spokesperson of Amazon said they have initiated proceedings to enforce their contractual rights. He said it will be inappropriate if they discuss any more details as this matter is regarded as a part of sub-judice.

Actions taken by Amazon

As we are already aware, Amazon, due to its certain clauses with the Future Group, has the right of first refusal to acquire more status in the Future Retail. Therefore, Amazon responded by filing a complaint to the Singapore International Arbitration Centre (SIAC), which is a neutral jurisdiction with high integrity and international standards. This has led to an interlude stay on Future Group deal with Reliance. Although both Reliance and Future group are not bound by SIAC until it is approved by Indian Courts. Also, Amazon has urged SEBI to consider the stay order on Reliance-Future deal as the deal still has to take approval from the SEBI (Security Exchange Board of India). SEBI was founded on April 12, in the year 1992. SEBI is the controller of the securities and stock market in India held by the Indian Government. Amazon has approached Singapore International Arbitration Centre SIAC as it's a neutral jurisdiction with high integrity and dispute resolution standard. Also, it claimed that the Future Group has dishonoured the contract under which Amazon bought a stake in the subsidiary. Reportedly Amazon has written to market regulator securities and exchange board of India and stock exchange (SEBI) requesting them to stop the Future Retail-Reliance Retail deal. As the deal didn't mention what would happen to Amazon's stake. The company has asked the regulator and bourses to take into concern the Singapore arbitrator's interim judgment which has put on hold the 24,713 crore transaction between Future Group and Reliance Industries Limited. The PTI report says, Amazon has shared a copy of entering judgment with SEBI, BSE, and NSE. The Future Group Retail deal is directed to approval from several regulatory authorities including the SEBI and the CCI. It is speculated that SEBI and other authorities will take into consideration the interim order of Singapore arbitrarily as they are reviewing the proposed deal.

Future Group’s point of view

According to the sources close to the Biyani's family, the notice served as a thunderbolt for them as everything was conferenced with Amazon before signing the deal. It is said that for the next 15 years, Kishori Biyani and his family members are barred from participating in the retail space. According to the space of the arrangement, neither Kishori Biyani nor his relatives can act in any of the retail section. A spokesperson said they have initiated steps to enforce their contractual rights. The Future Group admitted that the agreement with Mukesh Ambani was marked after the web-based business behemoth declined it. However, the US entity has the first right to invest in Future Retail after three years and before ten years, as per Amazon's contract with Future Coupons. Although, dealing with Amazon was conditional based on the government's FDI policy permitting foreign multi-brand retailing firms, stated that there is no policy, they can't invest. Future Group had reported selling its retail, co-ordinations, wholesale commercials and warehousing organizations to Reliance Retail Ventures Ltd (RRVL) They will be operating the retail business of RIL- on an ongoing issue for the 24,713 crores in August this year.

Another Angle

Amazon has counted India as a rising market that has already been set back by antitrust probes. In Future Retail, Amazon has shown high interest. Reliance is acquiring the retail, wholesale, logistics and warehousing businesses from the Future Group. Reliance Retail runs its retail shops in various formats like grocery (Reliance Fresh), electronics (Reliance Digital), and fashion apparel (Reliance Trends), but it fails to touch the landmark of Future Group in the retail sector, especially retail grocery shopping. This deal could now secure a leading position for Reliance Industries in the retail market too. After the entrance of Reliance Industries, the e-commerce platform in the grocery segment expects big competitors. In e-commerce, especially the grocery part is the biggest battle platform for India. Last year Reliance introduced Jio Mart. It’s an e-commerce venture which offers free express deliveries from nearby stores. Jio mart delivers groceries and electronics in various cities. It’s a serious challenge for online retailers like Amazon, Flipkart and DMart too. Jio Mart is India’s largest retail chain, which found a much easier way to expand its position in India. Jio platforms will work with Reliance to digitise small and medium-sized businesses. Flipkart is a new e-commerce competitor on the list. There are millions of registered users on Flipkart. The stage has a user-friendly design and it provides mobile app customer services which makes it one of the biggest competitors of Amazon and Reliance. Now it will be interesting to see the competition between these major e-commerce platforms after Reliance’s merger with Future Group. As we are well aware of Future Retail’s public demand and groundbreaking performance in the offline retail sector.

Impact on Future Group

The impact on the Future Group will be very detrimental for them as they were already under huge debt pressure and have already lost about 7000 crores in the first few spans of COVID months. However, even though the tribunal of the SAIC has restrained the completion of the deal, currently under the Indian law, there is no express mechanism for enforcement of the orders of the emergency arbitrator as both the parties went voluntarily to the SAIC. Then again, if the parties do not comply voluntarily to the decision made by SAIC, then the party which has won the emergency award, which in this case is Amazon, can move to the high court under the Section 9 of Arbitration and Conciliation Act 1966. Then, if the decision does not come in favour of the Future Group, they cannot challenge the decision which would eventually lead to several job losses in the Future Group. This can be a huge impact for the Future Group as they already lost about 7000 crores in the span of the first three to four months during COVID-19. Also, the company’s debt distress will be worsened now. It already suffered a huge amount of loss due to diversification too soon. This deal has knocked hard on the Future Group and it might result in the closure of the group if the claims made by Amazon are proven true by the SEBI or Indian Courts.

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