Future Retail’s Independent Directors Say Amazon Playing ‘Game Of Smoke And Mirrors’
Amazon’s offer is posturing and not to help Future Retail clear dues to lenders, say FRL’s independent directors.
Future Retail Ltd. has accused Amazon.com NV Investment Holdings of being non-serious in its offer to assist the cash-strapped retailer.
The directors have rejected the proposal saying Amazon has failed to assist Future Retail in clearing immediate dues to avoid being classified as a non-performing asset, according to the letter signed by the independent directors. BloombergQuint has reviewed a copy.
"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.
In their rejection letter on Tuesday, the independent directors said Amazon's offer was more of posturing for extraneous reasons and not to address the crisis which the company finds itself in.
Future Retail has to make a payment of around Rs 3,494 crore to its lenders by Jan. 29 to avoid being classified as an NPA. Last week, Amazon offered financial assistance to Future Retail by proposing a Rs 7,000 crore investment by private equity firm Samara Capital, a proposal Amazon has made before as well. The independent directors sought clarifications from Amazon on the legal structure of the transaction and Amazon’s role in it.
Further, in their rejection letter, the independent directors have stated that Amazon has failed to respond to their specific query on whether it was willing to extend a loan of Rs 3,500 crore by Jan. 24 which could have been used to repay the immediate dues of the lenders.
Any proposal will have to provide a comprehensive solution for banks, employees, shareholders, vendors, and other stakeholders of FRL. Amazon's offer doesn't meet this basic criteria on speed and timing of funding, legal compliance and adherence with the regulatory rulings, the directors have said.
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 sale of small-store formats assets to repay lenders to avoid an NPA classification.Letter By FRL's Independent Directors.
Attempt To Buy FRL For Cheap
At its core, Amazon's offer is to buy all of FRL’s retail assets for Rs 7,000 crore, the directors have stated in their letter.
First, they've pointed out, this price is significantly below the amount needed to discharge FRL’s total liabilities, aggregating to Rs 12,027.31 crore till just March 2022.
When seen in the context of the financials of the Reliance transaction by way of the scheme of arrangement, your offer is plainly an attempt to buy the FRL assets on the cheap.Letter By FRL's Independent Directors.
Second, the directors have reiterated their concern as to the legal structure by which Rs 7,000 crore will be infused. Amazon had offered to "facilitate" discussions between Samara Capital and Future Retail.
Amazon's exact role and relationship with Samara Capital is unclear. Any investment by Samara must be transparent, and not an indirect investment by Amazon contrary to the rules, the directors have stated.
For this purpose, it is necessary that Amazon/Samara transparently disclose to us and the authorities, the ultimate beneficial owners/contributories 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.
Foreign direct investment policy in India regulates and limits foreign investment in multi-brand retail.
Any foreign investment in multi-brand retail is impermissible without government approval, and Amazon should act with transparency in matters of funding of an Indian listed company, the directors have reiterated.
In rejecting Amazon's proposal, the directors have said they would not assess any offers from the U.S. e-commerce major until it offers a solution that addresses FRL's financial requirements in a legally compliant manner.