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MUMBAI : Amazon.com Inc. is preparing a bailout plan for cash-strapped Future Retail if the Singapore International Arbitration Centre (SIAC) rules against a planned takeover of the Indian retail chain by Reliance Industries Ltd (RIL), two people aware of the internal discussions at Amazon said.

SIAC is expected to give its final verdict in the matter later this month after holding several rounds of hearings since August last year.

“Future Retail will immediately need a 5,000-5,500 crore funding line to avoid defaults to bondholders and bank loans that can be provided by Amazon through an alternative investment fund (AIF) route,’’ one of the two people cited above said, requesting anonymity as the talks are private. “Due to the accumulation of dues, there is a cash deficit, and this deficit is a result of an asset-liability mismatch, but ultimately it depends on whether Future group takes up the offer," the person said.

“Amazon eventually plans to bring in more investors, including private equity funds, to participate in equity infusion in the Kishore Biyani-led group, which faces the bleak prospect of bankruptcy if the SIAC ruling goes against it," the second person said.

The Supreme Court on Friday ruled that last year’s emergency arbitration award by SIAC was valid and enforceable in India.

Future Group announced on 29 August 2020 a 24,713-crore sale of its retail and wholesale assets to Reliance Retail Ltd, a unit of Mukesh Ambani-controlled RIL. The deal is being opposed by Amazon, which has alleged that the transaction violates its 2019 pact with Future Coupons Pvt. Ltd that prevents Future Group from selling shares of Future Retail to some prohibited entities, including RIL.

“Right now, Future needs to take care of its dues and get enough working capital. Amazon is ready to salvage Future Group by bringing in enough capital if Future continues to work as Amazon’s partner as per the contract between Future Coupons and Amazon that was signed in August 2019," the first person said.

Amazon indirectly owns about 3.5% in Future Retail after buying 49% of Future Coupons for 1,500 crore in August 2019. Since Amazon cannot directly raise its stake in Future Retail, the US company can choose to become the majority investor in an AIF, which could be managed by a private equity firm or a similar entity, the first person said.

“Amazon, along with other large investors such as family offices, can infuse funds that will be primarily used for repaying Future Group’s debts. Once the debts are paid, the amount in the AIF could be further raised, or more AIFs could be brought in for further funding," the person said.

Mint reported in March that Amazon had assembled a team of blue-chip investors including PremjiInvest, TPG Capital, Verlinvest and SSG Capital to rescue Future Group. However, Harish Salve, the counsel for Future Group, denied at the time that Amazon had made an offer to bail out the retailer.

Referring to communication between Future promoters and Amazon officials last year, Salve said, “Amazon is a trillion-dollar company. For them, investing 25,000 crore is peanuts…if they wanted to. Surely, if they wanted to, they could have".

Like the earlier proposal, this time, too, Amazon’s funding proposal involves an infusion of about 6,000 crore through a mix of equity and debt. Future group has been battling a severe liquidity squeeze for the past two years.

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