The Future of Future Retail Ltd

CMP: Rs. 44.85

Many of the blog readers might have been thinking: What is the Future of Future Retail Ltd (Rs.44.85), especially when the media is going ga - ga about its collapse in case the Future Group - Reliance Deal doesn't materialise. Right? 

Before starting on the topic, I must remind you the whims of media. I hope most of you know how most media houses behave or work. Now let me touch upon the few points:

#As mentioned in my last Facebook post, the lawyers from the Future Group side, especially Harish Salve, hereto pleaded the case like a bunch of "Anadis", without taking into account the vital facts and figures. The unfortunate part is the continuance of such lawyers to represent such an important case. Judging the merit of the High Court judgment, it is quite obvious that Harish Salve & Co, should have been sacked by the Future Group, by now. 

It is because of their incompetency and there lack of knowledge in dealing with arbitration cases, the battery of lawyers from the Amazon side, could manage to eke out a suitable judgement in their favor from the Delhi High Court. Congratulations to them, they have genuinely worked hard as a team, exhibiting high level of professionalism. 

#Now there is another part of the story. According to a report published in Bar and Bench, 21 February, 2020.

//The Delhi High Court on Monday asked e-commerce giant Amazon and Kishore Biyani's Future Retail Ltd (FRL) if they were open to resolving their disputes arising out of the latter's deal with Reliance out of court (Amazon.com NV Investment Holdings LLC v. Future Coupons Pvt Ltd & Ors).

While clarifying that the court proceedings would not be halted, a Single Judge Bench of Justice JR Midha suggested that the matter can be referred to two retired Supreme Court judges.

"Both of you tell by tomorrow whether any endeavour can be made...In commercial matters, it is always helpful to find a solution", the Court told the senior counsel appearing for the two companies.

While Senior Advocates Gopal Subramanium and Rajiv Nayar for Amazon said that they were agreeable to the suggestion, Senior Advocate Darius Khambata sought time to take instructions.

"For a person you've taken money from, you can at least make an effort to resolve...", the Court remarked.

The Court was hearing Amazon's petition seeking enforcement of the emergency award restraining Future Group from going ahead with the deal with Reliance Retail//

Thus while the Amazon seemed to be ready for a out of court settlement, Future Retail seemed to be reluctant. 

#But whatever be the outcome of the court case it is a win win situation for Future group. It is because Amazon has already invested around Rs.1500 crore in a sister company. Amazon picked up a 1.30% stake in Future Retail last year through Future Coupons, in which it bought a 49 per cent stake.  Amazon picked up a 1.30% stake in Future Retail last year through Future Coupons, in which it bought a 49% stake.

#The fundamentals of Future Retail Ltd is set to improve following the lifting of Nationwide Lockdown. 

#Commenting on the single judge bench order, the senior advocate Gopal Subramaniam, appearing on behalf of Amazon, said, “Whatever order has been passed by the Ld. Single Judge is anyway subject to the Supreme Court order. The SC’s last order was interim in nature and governs the rights of the parties as of today”. He also submitted that Amazon will move the Supreme Court to make the single judge order operative. The matter is listed in the apex court and scheduled for hearing on April 27.

#Whether Reliance wins the deal or not, the FIs and Banks have drawn out a plan to give a lifeline to the Future Group. 

Hence, I feel though in the short term the scrip may look to be going down but in the long run, the shareholders of Future Retail Ltd would be beneficial. 

Meanwhile, DMart which is registered as Avenue Supermarts Ltd, has shown that it has broken away from the COVID-19 inflicted pain, as it posted a 16% rise in net profit of ₹447 crore for the December quarter. Its revenue was also up by 10% at ₹7,542 crore. Photo: Business Insider. 

The whole deal is confusing as our FDI norms do not allow investment in multi-brand retail. So the question of Amazon bailing out Future Retail doesn't arise, unless it partners with a private equity fund. 

Amazon's investment in enterprisea such as Aditya Birla Retail's More was in partnership with Samara Capital.

Moreover, a coupon company giving Amazon the first right of refusal is a questionable proposition. I therefore feel the honourable Supreme Court of India, will look into such nitty gritties.

The game is not over for Future Retail, provided they employ a good corporate lawyer to plead the case.

Future Retail Ltd (Rs.44.85), will also improve. A Rs.30,000 crore enterprise can't fall all of a sudden due to debt. Only patience is needed to hold on to such blue chips and average on declines, to get splendid returns in Future.