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Future Group Entities’ Shares Tank Again After Reliance Deal Fails: 10 Points

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Future Group Entities’ Shares Tank Again After Reliance Deal Fails: 10 Points
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Future Group firms’ shares sink again as Reliance deal fails: 10 Points

Shares of Future Group companies tumbled again on Tuesday on increasing concerns that the group faces bankruptcy risk, despite a surge in benchmark indices and broader Asian stocks trading higher.

Here Is Your 10-Point Cheatsheet To This Big Story:

  1. On the BSE Sensex, Future Retail was down nearly 5 per cent after falling by as much in the previous session. Future Consumer crashed over 12 per cent after nose-diving nearly 20 per cent previously, and Future Enterprises declined almost 10 per cent, the same as on Monday.

  2. Those stock prices have tanked since news over the weekend showed Reliance Industries Ltd (RIL) has called off the ₹ 24,713-crore deal after Future group’s secured creditors voted against it. 

  3. Secured creditors – primarily banks and financial institutions – of several listed entities of Future Group voted against the Reliance Retail deal worth ₹ 24,713 crore, according to a regulatory filing on Friday. To get the Reliance deal through, Future Retail needed 75 per cent approval from its secured creditors, which it failed to get.

  4. Future Retail Ltd is on course to bankruptcy after its secured creditors rejected the Reliance deal this week and as Bank of India initiated insolvency proceedings last week.

  5. Bank of India had moved the National Company Law Tribunal (NCLT), filing a petition to initiate insolvency proceedings against debt-ridden Future Retail last week after the company defaulted on its payments to lenders because of the long-running legal feud with Amazon.

  6. To stave off bankruptcy, the Future Group of companies had called meetings of their shareholders, secured and unsecured creditors to get the approval for the deal – under which it plans to sell 19 companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd (RRVL).

  7. Amazon Inc had opposed the Future Group of companies’ meetings to approve the Reliance deal. Amazon and Future Retail have been in a bitter and long-running legal battle. Amazon opposes the Future-Reliance deal because it was against its 2019 agreement with FCPL, the promoter entity of FRL – through which it acquired a 49 per cent stake in FCPL for about ₹ 1,500 crore. 

  8. Amazon also dragged FRL and its promoters to the Singapore International Arbitration Center (SIAC), where the Emergency Arbitrator passed an interim order in favour of Amazon in October 2020, stopping FRL from taking any further steps until the case is decided. Amazon has also initiated various litigations against FRL – before the Delhi High Court, the Supreme Court, and the NCLT.

  9. In an example of the tirade of accusations and counters between Amazon and Future Retail: FRL had told the Delhi High Court, “for ₹ 1,400 crores (worth of the Amazon-Future disputed deal), Amazon has destroyed a ₹ 26,000 crores company. Amazon wanted to destroy us, and it succeeded. Amazon has been successful in what it wanted to do.”

  10. Amazon, in response to Reliance Retail’s take over of at least 350 stores operations after FRL defaulted on its lease payments, had said the transfer of Future Retail’s assets looks like “Ripley’s; believe it or not,” FRL let go of over 800 shops without any protest.

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