Due diligence may delay Future deal; stakeholders to seek more time from SC

In the midst of a long-drawn tripartite legal battle involving Reliance Industries, Amazon and the Future Group, carrying out due diligence of assets belonging to Kishore Biyani’s retail business has turned out to be a challenge. To work out the modalities of due diligence, the stakeholders would need time, according to people close to the Amazon-Future-RIL case.

“With no sign of settlement between the parties concerned, companies and lenders are likely to seek more time from Supreme Court on March 15 to be able to do diligence,” said a source. The diligence process will include identifying the Future stores across the country along with the group’s other assets, manpower and debt to be serviced. A valuation will be possible only after ascertaining where the assets stand and their legality, according to the source.

While pointing out that it would be long haul, another source said the next couple of days would be critical to understand how the due diligence will be done and who will do it. All parties are involved in back to back meetings before the March 15 deadline set by the top court for a negotiation.   

Meanwhile, even as several options including a joint venture between RIL, Future and Amazon are being thrown up by the legal fraternity, the companies concerned are against any tripartite peace deal, executives pointed out. Sources, however, pointed out that a discussion between the three companies had taken place earlier this week and a deal on the table included a tripartite JV.

While RIL is not keen on a tripartite JV, according to a source familiar with Amazon’s merger and acquisition strategy, the formation of any Amazon-Future-RIL joint venture is a huge challenge. ‘’Future Group does not have any assets to show for the due diligence process,’’ the source argued. These assets, including stores, have already been taken up Reliance.

Future Retail in a stock exchange filing said that the long-stop date for the scheme (scheme to sell Future Group’s retail, logistics, and warehousing businesses to Reliance Retail for about Rs 25,000 crore) has already been extended by six months to September 30 by Reliance.  

Sources also said the takeover of Future stores by RIL scuttles Future Group lenders’ options to recover their Rs 17,000-crore ($2.2 billion) debt.

“Future Retail’s total asset value will plummet significantly as over 200 stores move into a new ownership arrangement,” said a source. Adding that Amazon is also in negotiations with Future Group to pay back the invested Rs 1,500 crore and asked for due diligence of documents and procedure to repay the money.

On March 3, Amazon had proposed a dialogue with Future Group to end their legal battles, to which the Kishore Biyani-led retailer had agreed. The Supreme Court gave both sides time until March 15 to explore a settlement.

Harish Salve, Future Group’s counsel, agreed to the proposal and said that nobody is winning. SC also said, “If you want to fight legally, you do, and we will decide. But we only thought about the interests of the parties.”

The issue between Amazon and Future dates back to August 2019, when Amazon acquired 49 per cent in Future Coupons Pvt Ltd (FCPL), the promoter entity of Future Retail, for around Rs 1,500 crore. 

One year later, in August 2020, Future Group struck a $3.4-billion asset-sale deal with RIL. In October 2020, Amazon sent legal notice to Future for doing the deal. The US e-commerce major alleged it breached Future’s agreement with Amazon.