Amazon crafts another Future rescue

The offer may also compare well with that made by Reliance Industries Ltd to Future Group, they said, requesting anonymity.

According to the latest internal discussions at Amazon, the company can raise its original capital infusion offer of ₹7,000 crore to help its estranged partner Future Group meet the debt obligations of FRL if lenders enter into an understanding with Amazon.

Emails sent to Amazon and Future Group spokespersons did not elicit any response till press time.

“Amazon feels that an initial infusion of up to ₹10,000 crore should be sufficient to meet FRL’s immediate debt obligations for the next 3-4 quarters and the company’s working capital needs. Once the business turns around, post the capital infusion, the rest of the debt can be repaid either from the cash flows or from further capital infusion," said one of the two people cited above.

The proposed Amazon rescue plan entails investment in Future Retail through an Indian owned and controlled company (IOCC)).

“Amazon is ready to do fresh due diligence on Future Retail, meet its lenders, which include India’s largest bank State Bank of India, and enter into an agreement to invest in FRL through an alternative investment fund. Amazon, being a foreign entity, faces FDI restrictions to take complete control of a domestic retailer. Therefore, an Indian owned and controlled company structure is preferred to facilitate further investment in Future," the first person said.

In such a scheme, around 19 business entities of Future Group could be amalgamated into Future Enterprises Ltd and then transferred to an IOCC, he said.

“The new investors, including Samara Capital, which could be brought in by Amazon will get to buy the small stores from FRL directly. And, FRL’s big stores such as Big Bazaar and Fbb can be transferred to a new subsidiary of the proposed Indian owned and controlled company, wherein FRL will hold 51%, and the other investors such as Samara Capital can hold 49% stake. Amazon can have an indirect stake in the Indian owned and controlled company to facilitate further investments whenever required," said the first person.

Future Trendz was incorporated as a subsidiary of FRL on 15 September 2016 to carry on Future Group’s fashion retail business and related activities. Future Trendz holds a 99.96% stake in Future Speciality Retail Ltd.

According to Amazon’s bailout plan, the Indian owned and controlled company could be registered as a domestic entity (with joint investment by Amazon and another large investor) so that it is not bound by foreign investment restrictions in FRL.

Amazon also wants FRL to unwind the ₹4,000 crore related party transactions to make more cash available in FRL’s books, according to the two people.

Amazon indirectly owns about 3.5% in Future Retail after buying 49% of Future Coupons for ₹1,500 crore in August 2019. As a foreign entity, Amazon cannot directly increase its holding in FRL.

Future Group, on 29 August 2020, announced its decision to sell retail assets to RIL for ₹24,713 crore. The deal has been legally contested by Amazon on the grounds that a contract signed between Future Coupons Pvt. Ltd and Amazon in August 2019 required Future Group to take Amazon’s prior consent for the sale of its retail assets to 30-odd rival entities, including RIL.

Amazon and Future have been entangled in a bitter legal battle ever since the RIL-Future was announced.

On 10 August 2021, Mint first reported that Amazon was readying a bailout plan for Future.

According to the two people, Amazon eventually plans to bring in more investors, including private equity funds, to infuse cash in the Kishore Biyani-led group, which may land in the bankruptcy court if the RIL deal falls through and the group fails to bring in enough investors.

Future and Amazon are currently awaiting the Supreme Court’s verdict on Amazon’s objections to the RIL-Future deal.