Amazon.com NV Investment Holdings has been accused by Future Retail Ltd. of being non-serious in its offer to help the cash-strapped retailer. According to the letter signed by the independent directors, the proposal was denied because Amazon failed to assist Future Retail in settling immediate dues to avoid being designated as a non-performing asset.
“It is now clear that your letters were just a game of smoke and mirrors just to serve your purpose of gaining all media attention and create media headlines that ‘Amazon is prepared to help’.” – Letter by FRL’s independent directors.
The independent directors claimed in their refusal letter on Tuesday that Amazon’s offer was more of a pretext for other reasons than to address the company’s crisis.
To avoid being labeled as a nonperforming asset (NPA), Future Retail must make a payment to its lenders of roughly Rs 3,494 crore by January 29. Last week, Amazon offered Future Retail financial aid by offering a Rs 7,000 crore investment by private equity firm Samara Capital, a request Amazon has made previously. The independent directors wanted Amazon to clarify the transaction’s legal framework and Amazon’s role in it.
The independent directors also noted in their refusal letter that Amazon had failed to respond to their specific inquiry about whether it was willing to issue a loan of Rs 3,500 crore by January 24 that could have been utilized to satisfy the lenders’ immediate dues.
Any proposal must offer a complete solution for FRL’s banks, employees, shareholders, vendors, and other stakeholders. The directors have stated that Amazon’s bid does not meet the basic standards for funding speed and timing, legal compliance, and adherence to regulatory regulations.
You have chosen to ignore this requirement. It is now apparent that you neither were nor are serious about funding FRL, within the required timelines but merely want to block the sale of small-store formats assets to repay lenders to avoid an NPA classification.
— Letter By FRL’s Independent Directors.
The directors indicated in their letter that Amazon offers to buy all of FRL’s retail assets for Rs 7,000 crore.
First, they point out that this price is much lower than the amount required to pay off FRL’s total liabilities, which total Rs 12,027.31 crore as of March 2022.
Second, the directors have expressed their concern about the legal structure that will be used to inject Rs 7,000 crore. Amazon had volunteered to “assist” Samara Capital and Future Retail in their talks.
When seen in the context of the financials of the Reliance transaction by way of the scheme of the arrangement, your offer is an attempt to buy the FRL assets on the cheap.
Letter By FRL’s Independent Directors.
The actual involvement of Amazon and its partnership with Samara Capital are unknown. The board has indicated that any investment by Samara must be transparent and not an indirect investment by Amazon in violation of the guidelines.
In multi-brand retail, India’s foreign direct investment policy restricts and prohibits foreign investment. Any foreign investment in multi-brand retail is illegal without a government license, and Amazon should operate transparently when it comes to investing in an Indian publicly-traded company, according to the board of directors.
For this purpose, it is necessary that Amazon/Samara transparently disclose to us and the authorities, the ultimate beneficial owners/contributors to the Samara fund in India through various layers. Further, Amazon should confirm that it has not directly or indirectly funded any amount to Samara.
– Letter by FRL’s independent directors.
The board of directors rejected Amazon’s proposal and stated that they would not consider any future bids from the e-commerce behemoth unless it provides a solution that meets FRL’s financial needs in a legally compliant manner.