The Securities and Exchange Board of India (SEBI) granted approval to the deal between Kishore Biyani-led Future Group and Reliance Retail, an arm of the Mukesh Ambani-led Reliance Industries Limited (RIL) on January 20.
In August 2020, Biyani had entered into a Rs 24,713 crore agreement with Reliance Retail. As part of the pact, Future Group was to sell its retail, wholesale, logistics and warehouse businesses to Reliance Retail Retail Ventures (RRVL).
The SEBI, in its letter of approval, listed a number of conditions in accordance to the Composite Scheme of Arrangement. The regulatory body has also referred to the apprehensions raised by Amazon.
"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 stated.
"Company shall ensure that proceedings pending before SEBI against the entities part of the promoter/promoter group or are directors of the companies involved in the scheme, should be highlighted in the scheme document filed before National Company Law Tribunal (NCLT)," it further added.
The US-based Amazon has written to SEBI a number of times over the past three months, asking the regulatory body to stall the Future-Reliance deal. The company has accused Future Group of violating a pact signed by it by entering into a deal with Reliance Retail.
On December 21, Amazon Inc had also filed a plea before the Delhi High Court, seeking a stay on the Future-Reliance deal.
SEBI, while referring to the complaints registered by Amazon and the plea filed in Delhi HC, has asked the entities involved in the amalgamation to keep their shareholders informed about the legal dispute.
"Company shall ensure that any future disputes, complaints, regulatory actions or proceedings, or orders issued therein involving the draft scheme if any, shall be brought to the notice of shareholders prior to the approval by NCLT," it added.
"In light of the above, we hereby advise that we have no adverse observations with limited reference to those matters having a bearing on listing/de-listing/continuous listing requirements within the provisions of Listing Agreement, so as to enable the company to file the scheme with Hon’ble NCLT," SEBI further said.
Amazon had gained a minority stake in Future Group after taking over 49 percent stakes in Future Coupons, which serves as the promoter entity of the former.
“The granting of conditional approval by market regulator SEBI sets a precedent for future consolidation of the country’s exponentially growing retail industry," says Mahesh Singhi, Founder & MD, Singhi Advisors.
"A synergistic collaboration between two retail giants in the country holds the potential to unleash significant value propositions and operational efficiencies for concerned stakeholders and boost the M&A ecosystem in the country’s retail sector," Singhi added.
According to the Future Group CEO, his company reached out to Amazon eight times after its financial condition had weakened. The e-commerce giant, however, did not provide any major aid.
"They could have provided us funds through affiliates or financial institutions by taking over loans from existing lenders but they never did despite the agreement clause and our request," Economic Times quoted Biyani as saying earlier this month.
"The Reliance deal was a saviour for us and the employees, stakeholders, shareholders and creditors," he added.Disclaimer: Reliance Industries (RIL) which is the parent company of Reliance Retail, JioMart and Reliance Market is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments which publishes Moneycontrol.