How is that a deal where an Indian Company, which is trying to buy the assets of another Indian Co, which is more than willing to sell, is being stopped by a foreign minority shareholder through in an order passed in an Arbitration Court of another foreign country? thread (1/20)

(2/20) Let’s rewind a bit- Future Group is a web of companies with complicated cross holdings & related party transactions. Combined, they have around Rs 15000-20000 cr of debt.
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(3/20)Future Group's flagship brand “Big Bazaar” is a part of Future Retail while the other ancillary assets such as logistics, warehousing are part of other group companies.

(4/20) In 2019, Kishore Biyani, a future group promoter who was on the verge of defaulting on its debt obligations, actively started looking for investors to either buy or bail them out.

(5/20)In the process, Future Group received a Rs 1,500 crore investment through another promoter company called “Future Coupons”. Future coupons got this money by selling their 49% stake to Amazon.

(6/20) Future coupons hold 7.8% in Future Retail, so indirectly Amazon became a 3.58% shareholder of Future Retail. An important part of the deal btw Amazon & Future Coupons is a call option which will allow Amazon to acquire all of Biyani’s stake in Future Retail in the future

(7/20) The question that arises is this - why was investing in Future Retail such a complicated process? Simply put, it is because Indian regulations do not allow foreign players to directly invest in multi-brand retail companies.

(8/20)Amazon had cleverly found a loophole and invested indirectly in Future Retail through Future Coupons and kept for itself an option to buy more stake in the future, in case the regulation changed.

(9/20)Another question arises. What were FIPB/SEBI doing when Amazon invested in FC? Why didn’t regulators raise any red flags? They would've had to be aware that this investment doesn't qualify within the prevailing Indian regulations or was atleast,against the spirit of the law

(10/20)It seems fair to assume that desperation for instant cash relief for the mounting debts of the Future Group had driven Biyani to sign a deal with Amazon. After all, nobody wants to turn into a Vijay Mallaya or a Neerav Modi.

(11/20)Unfortunately, the Rs 1,500 crores were only a temporary fix. With imminent possibility of Future Group companies’ debt becoming NPAs for Banks growing, the Biyanis must have been more than eager to sell off Future Group Companies and fix their debt problems permanently.

(12/20)This is where Reliance Retail came in, offering a single cheque of 24,000 crore to buy out Future Group assets, a more than fair value. Unluckily for Amazon, that they couldn’t offer a straightforward deal like this because of the above-mentioned Indian regulations.

(13/20)Amazon is now faced with a further problem; that RelRetail’s online platform JioMart will leverage the offline infrastructure of Future Grp assets to compliment their online retail business. This gives Reliance a huge advantage over others, just like Amazon has in the US

(14/20)This deal, however, has been put on hold by an Arbitration Court in Singapore. So, what happens if this deal doesn’t go through? In a single sentence - more NPAs for Indian banks, job losses, destruction of shareholder value, etc.

(15/20)So far, it seems as though Amazon and the Arbitration Panel in Singapore are comfortable with that with court making the following statement - “Economic hardship alone is not a legal ground for disregarding legal obligations”.

(16/20)My question is the reverse of this statement. Are legal obligations enough to unleash economic hardship for the remaining stakeholders of Future Retail?

(16/20) And is this destruction of economic wealth in India to please a 3.5% indirect minority shareholder, who should not have been in the business of multibrand e-commerce retail in India in the first place, by the law itself?

(17/20)If India wants to be China, then we need to learn from China on how to put our own economic interest above anything else. I am not a legal expert, but the Reliance and Future deal cannot be held back, especially if we are serious about creating our own FANG wealth creators

(18/20)One also has to express immense respect for Mukesh Ambani, who has succeeded in getting massive foreign investments in Reliance from PE players, in Jio Platforms and RelRetail, in the most challenging economic environment that we have seen in the last few decades, at least

(19/20)In the end, we need to stop looking for validation from the companies from the west. Indian entrepreneurs have the capability to create world class businesses & M.Ambani is only one such example. If we want the West to respect us, we must learn to respect ourselves first

PS- If you feel I have missed a point, or misinterpreted a fact, please feel free to respond. Let’s try and make such conversations richer. #futuregroup #Amazon #Singapore #Reliance #RelianceIndustries #IndianEconomy #CNBCTV18Market