InvestorQ : What will be the impact of the latest stay obtained by Amazon against the RIL-Future deal on the shareholders of Future group?
Dia Deshpande made post

What will be the impact of the latest stay obtained by Amazon against the RIL-Future deal on the shareholders of Future group?

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swati Bakhda answered.
8 months ago
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Recently, Amazon got an interim relief granted in a Singapore arbitration court intended to put the RIL-Future deal on hold. Amazon had objected to the deal on the grounds that under the term sheet with Future Coupons, Amazon should have the right of first refusal in FEL.

The deal with Amazon could not happen for two reasons. Firstly, Amazon was under a lock-in period post the stake purchase in Future Coupons. Secondly, the ground rules are still not too clear on FDI in multi-brand retail in India. The legal wrangle could be long and could cost time and value for the minority shareholders of Future Group.

While, the retail investors in Future group would stand to gain irrespective of whether Amazon takes over Future group or Reliance takes over. However, if there is suspended animation then the minority shareholders of Future group could really suffer.

The impact was visible in the share price of Reliance which was down 4% in Monday trades as the Amazon order from Singapore has put RIL in a tight spot as the retail deal is likely to take much longer and may be caught in a legal and procedural rigmarole. RIL was expected to fast track the deal but that is apparently not happening now.

As much as Future is desperate for the deal, RIL is also keen to push the deal fast. The deal would virtually cement Reliance’s position as India’s largest retailer by boosting its retail outlets by 15% and add 4.1% to Reliance’s retail market share in the organized segment and eventually take it to 17.8%.

Clearly, the small and minority shareholders of Future Group are likely to be the losers in the process as any hopes of a quick settlement is now ruled out. It is also likely to result in value erosion for shareholders.

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