6 highlights
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This morning, the Supreme Court held that an emergency arbitration award by the Singapore International Arbitration Centre that stalled the sale of his Future Group’s retail business to Reliance Industries was indeed valid, putting the deal in abeyance.
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The Supreme court verdict not only prolongs the uncertainty surrounding the merger but will also cast a long shadow on the continuation of Future’s business. For Biyani, the merger would have offered an honourable exit from the business he founded two decades ago, but if lenders tighten the screws on the company’s finances, there is a good chance of the Future Group going belly-up.
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Biyani has been reeling under debt for a long time, which had first forced him to take a minor investment from Amazon in 2019. Subsequently, Biyani had pledged his own stake in the company as guarantee for loans for the business, which seemed in good shape as recently as December 2019. His confidence was such that to give a minority ownership in FRL to Amazon, Biyani had accepted a clause that forbade him from selling FRL’s assets to Reliance.
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Investment bankers say that Biyani acted in a rather selfish way to preserve his business interests without considering the fate of other shareholders. Though he had agreed not to sell his business to Reliance, he jumped at the first opportunity to do so as the deal promised to leave some money on the table for him.
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If it goes in Amazon’s favour, which looks likely, the only option left would be for Biyani (and lenders, indirectly) to approach Amazon for some kind of settlement or bail out, as IBC [Insolvency and Bankruptcy Code] would render a sub-optimal resolution
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The company has still not wiped out its capital but it will be only a couple of quarters before that happens. That’s not going to be a long wait.