Shares of listed companies of the Future group were locked in their respective upper circuit limits on BSE on Monday after the Competition Commission of India (CCI) approved an offer by Reliance Industries (RIL) to purchase retail, wholesale and logistics properties of the Future group on Friday.
Reliance Industries (RIL) and Future Enterprises (FEL) announced the deal on August 29, in which Reliance Retail will acquire Future Group’s retail & wholesale, logistics & warehousing business.
With the contract, Future seeks to get out of its debt trap, while Reliance is looking to consolidate its position with the transaction as the largest organised retailer in the world. Facing Amazon’s protests, the two players have said they would go ahead with the regulatory process.
FEL will maintain the production and sale of FMCG and the integrated apparel procurement and manufacturing sector and its insurance joint ventures (JVs) with Generali and JVs with NTC following this agreement.
FEL will grow strongly after this exercise with companies in the manufacture and distribution of FMCG products and integrated apparel sourcing and merchandising. The supply agreement with Reliance Retail and Fashion Lifestyle would further help these companies. This deal will also allow FEL to concentrate on the development and broaden its presence of new age brands in the FMCG and fashion space, the company said.
Future Retail and Lifestyle Fashions were sealed in the upper 10% circuit at Rs 79 and Rs 90.30 respectively on the BSE among individual stocks. In the 5% upper BSE circuit, Furure Businesses (Rs 10.45), Future Customer (Rs 8.27) and Future Supply Chain Solutions (Rs 102.6) were locked in. In contrast, at 43,969 points at 11:26 am the S&P BSE Sensex was up 0.20 percent.
Despite today’s rise, however the stocks of the Future Category have underperformed the market by dropping by up to 30 percent in the past three months, compared to an increase of 14 percent in the S&P BSE Sensex.
Future Group and Amazon conflict
In late August, Reliance Retail and Future Group revealed their proposed contract worth $3.4 billion. Amazon, which holds an interest in one of the holding companies of the Future Party, has raised objections over the transaction, claiming that the Indian corporation has engaged in insider dealing and breached contracts. Amazon has argued that its deal with Future Coupons, one of the holding companies of Future Group, prevented the Indian group from selling its assets to a rival business such as Reliance Retail
A Singapore arbitration court released an order late last month to temporarily stop the agreement between the two Indian retail giants, but because of the amount of water that order carries in India, it has been uncertain. Shortly after the court issued the order, Future Group and Reliance Retail said they were working “without any delay” to complete their contract.