Reliance-Future deal gets ‘conditional’ approval from market regulator Sebi

The Rs 24,713 crore deal between Reliance Industries Limited (RIL) and Future Retail has been granted conditional approval by market regulator Securities Exchange Board of India (Sebi). The development comes as a blow to Amazon Inc, which had raised an objection when the deal was first announced last year.

Based on the Sebi’s approval, the Bombay Stock Exchange (BSE) has also granted a “no adverse observation” report to the deal. While Sebi has approved the deal, there are some riders included as part of the deal approval.

Sebi said the case pending before the Delhi High Court and arbitration proceedings by Amazon, which has been contesting the deal, should be specifically disclosed by Future Group while seeking approval for the scheme of arrangement from shareholders or the NCLT, according to the BSE’s observation latter.

The BSE observation letter also stated that Sebi’s go-ahead on the draw scheme of arrangement would be subject to the outcome of the ongoing litigation proceedings.

What are Sebi’s conditions?

In its approval letter, Sebi has listed a number of conditions, based on objections raised by Amazon Inc.

“Company shall ensure that the shares of the transferee entity issued in lieu of the locked-in shares of the transferor entities is subjected to lock-in for the remaining period post scheme," Sebi said.

It also said that the company (Future Group) “shall ensure that proceedings pending before Sebi against the entities part of the promoter/promoter group or are not directors of the companies involved in the scheme, should be highlighted in the scheme document filed before the National Company Law Tribunal (NCLT)”.

This means that the shareholders and NCLT have to be provided details of all the complaints by Amazon Inc, submissions by Future Retail Ltd and all other proceedings in the Delhi High Court, Singapore International Arbitration Centre or any other court that has been involved.

The market regulator has also said that future disputes, complaints, regulatory actions, proceedings or orders in connection with the scheme should be brought to the notice of shareholders before NCLT approval.

Sebi has also asked Future Enterprises Limited to highlight that over 74 per cent of its business value post amalgamation of all the group companies will be transferred to Reliance Retail Ventures Limited (RRVL) and Reliance Retail and Fashion Lifestyle, both of which do not intend to list post the scheme.

“It is observed that there are certain ongoing litigations/arbitration/legal proceedings against the draft scheme. In view of the same, the company is advised that these comments of SEBI on the draft scheme of arrangement are subject to the outcome of any of the ongoing litigations/arbitration/legal proceeding involving the draft scheme and/or the decision by any competent authority/competent court in this regard,” stated the BSE observation letter.

Commenting on the development, an Amazon spokesperson pointed out that the comments of the market regulator on the proposed deal are subject to the outcome of ongoing arbitration and other legal proceedings. The global e-commerce giant is expected to keep challenging the deal legally.

Future-Reliance deal

In August 2020, Kishore Biyani’s Future Group had entered a deal with Mukesh Ambani’s Reliance Retail to sell retail, wholesale, logistics and warehousing assets for Rs 24,713 crore.

Soon after the deal was announced, Amazon raised an objection to the deal and alleged that Future Group had breached an existing agreement. It managed to temporarily halt the deal after getting an arbitration order against the deal.

Since then, Amazon and Future Group have been engaged in a battle of letters. On January 14, 2021, Amazon sent its eighth letter to Sebi and asked the market regulator to suspend its review of the Future-Reliance deal. Amazon highlighted that the matter was still being heard by the Delhi High Court.

Besides writing several letters to the market regulator, Amazon had also filed a petition before the Delhi High Court on December 14 last year, seeking a stay on the Reliance-Future deal.

The cash-strapped Future Group also retaliated against Amazon with letters to the market regulator. It also filed a plea for an interim injunction against Amazon to restrain it from writing to market regulator Sebi, CCI and other authorities about the arbitral order against its asset sale. The Delhi High Court had declined the request.

While Sebi has granted approval to the deal, it has clearly mentioned that the deal will be subject to the outcome of all legal proceedings in the matter.

The approval of the deal could be a major boost to Reliance, which is looking to expand its footprint in India’s lucrative retail market. The deal is likely to give Reliance an edge over rivals like Amazon and others that are also trying to expand retail businesses in India.

Source: www.indiatoday.in