The US-based etailer, in a letter to the independent directors on Saturday evening, had also said Samara Capital had “reiterated” that
it remained committed to the term sheet signed on June 15, 2020, which proposed a “purchase consideration” of Rs 7,000 crore for the retailer.
Ravindra Dhariwal, one of Future Retail’s three independent directors, however, described Amazon’s offer as a “smokescreen”, and said it was untenable.
“All the diligence has been done to death—by Reliance Retail—and by the banks as part of the OTR process. Their diligence request is just smoke and mirrors,” Dhariwal told ET. Their intent is clear: They want to say in media headlines that they can solve the problem and we are not allowing them. They want to stand up in the courts and claim they have a solution.”
“But any scrutiny of their offer will immediately tell you that it is untenable, unviable and will not come even close to solving the problem,” he said.
The three independent directors were scheduled to send a reply to Amazon late Sunday night. Gagan Singh and Jacob Mathew are the other two independent directors of Future Retail.
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Meanwhile, Future Retail is planning to approach the Supreme Court on Monday seeking an extension for its Rs 3,500 crore repayment to lenders, which is due on January 29.
In its letter to the independent directors, Amazon
had sought immediate access to Future Retail’s key financial, operational and other data, for Samara to conduct an expedited due diligence of the cash-strapped retailer in order to infuse funds into the company that is facing a debt default by the month-end.
“Samara Capital has once again reiterated to us that they remain interested and committed to lead and take forward the term sheet dated June 30, 2020, signed amongst Samara, FRL and the promoters of FRL, which contemplates a purchase consideration of (Rs 7,000 crore) with the assistance and cooperation of the independent directors,” Amazon said in its letter to Future Retail’s independent directors.
A person familiar with Future Retail’s independent directors’ way of thinking said that when Reliance Retail was offering Rs 24,000 crore and the company owed the banks Rs 12,500 crore, how could they accept a Rs 7,000 crore offer. “The banks have the first charge on assets. Will they allow this,” he said.
Dhariwal said Amazon’s offer was a “faulty bandage on a haemorrhaging patient”.
“This is just a smokescreen, a PR exercise which we have seen through. Within a day they changed their negotiator from Amazon’s Abhijeet Muzumdar to Samara’s Sumeet Narang. And haven’t confirmed their relationship with Samara,” he said. Muzumdar is the head of Amazon Smbhav Venture Fund and private investment & corporate development while Narang is the founder and managing director of Samara Capital.
The US e-commerce giant was responding to Future Retail’s independent directors who on Friday had sought Rs 3,500 crore in unsecured long-term loans from Amazon to help avoid Future Retail’s debt from being classified as non-performing assets by lenders in the event the Indian retailer failed to repay the amount to the lenders by January 29. In its Friday letter, the Future Retail directors had asked Amazon to confirm by Monday its willingness to fund the required amount.
In June 2020, Samara Capital had signed a non-binding termsheet to acquire Future Retail’s businesses including Big Bazaar, Easyday and Heritage among other chains for Rs 7,000 crore.
“The transaction envisaged in the Samara term sheet would ensure availability of funds in FRL at the earliest, through an asset sale and an equity infusion, which would be a direct antidote to FRL’s indebtedness,” Amazon wrote in the letter.
Amazon on Saturday further told the independent directors that the capital infusion plans will be in compliance with India’s foreign direct investment laws for multi-brand retailing as the entity taking over Future Retail’s network of stores would be an “Indian-owned and controlled entity structure led by Samara and supported by Amazon”.
“As regards compliance of any structure with Indian law, please note that this structure is also similar to the proposed acquisition of the retail and wholesale undertaking of the Future Group (which includes FRL’s retail assets) by Reliance Retail and Fashion Lifestyle Limited,” said the Amazon letter that was reviewed by ET.
Amazon has been embroiled in a legal dispute with Future Group since August 2020, when the slump sale of the latter’s assets to Reliance Retail for nearly Rs 25,000 crore was announced. Amazon objected to the deal and received a stay on the proposed deal from a Singapore emergency arbitrator. Amazon argues that Future Retail must seek its consent before parting with its assets as per the 2019 investment agreement with promoter firm Future Coupons Pvt. Ltd. that holds about 10% of Future Retail’s stake.
Meanwhile, domestic banks led by State Bank of India (SBI) have decided not to intervene in the dispute between Future Retail and Amazon. “We would rather concentrate on what can be done to recover dues rather than taking sides,” said one of the lenders. The correspondence between Amazon and Future Retail over the last one week was not directly addressed to banks but they have been marked on all the communications from Amazon’s side.
If Future Retail fails to pay lenders Rs 3,494 crore by January 29, lenders’ debt exposure of around Rs 10,000 crore will have to be classified as non-performing loans by January end. A $14 million coupon on its $500 million bonds is due on Monday (January 24).
Sangita Mehta contributed to this story.