Amazon.com Inc. assembled a team of bluechip investors, including PremjiInvest, TPG Capital, Verlinvest and SSG Capital, to rescue Kishore Biyani’s flailing Future Group in early 2020, two people familiar with the discussions at the time said.
The proposal involved an infusion of ₹6,000 crore in equity and debt, and a restructuring of the board and top management of Future Retail, these people said.
Amazon also worked across March, April and May to help Future Group repay mounting bank dues, avoid defaults and improve cash flows by selling its products on Amazon, these people said.
The revival plan engineered by Amazon is reflected in a presentation made by Future Group to a group of investors including Amazon, a copy of which Mint has reviewed.
In the presentation, titled Putting Future Retail Ltd (FRL) Back on Track, made before investors including Amazon representatives, Future Group executives proposed investments in tranches starting in May 2020.
The plan to marshal a group of marquee investors backed by Amazon to salvage Future Group from its liquidity squeeze and related issues was under negotiation even as the retail group navigated a severe financial crisis amid the coronavirus outbreak and a nationwide lockdown.
According to the presentation cited above, the investors would bring in around ₹6,000 crore through equity and debt to tackle the group’s bank dues and help it stay afloat without selling to RIL or any retail rival.
Amazon also proposed another plan, which involved a sale of Future Group’s retail businesses to reduce debt and use the cash to improve its other businesses.
However, on 29 August 2020, Future Group announced the ₹24,713-crore sale of its retail and wholesale assets to Reliance Retail Ltd, a unit of RIL. A Singapore arbitration tribunal blocked the sale in an interim order on 25 October, in a victory for Amazon. The case is now before the Delhi high court and the Supreme Court, while the deal awaits clearance from the National Company Law Tribunal (NCLT).
These documents may weaken Future Group’s argument that an unhelpful Amazon forced it to forge an alliance with Amazon’s key rival RIL in India’s $900-billion retail space.
Amazon indirectly owns about 3.5% in Future Retail after buying 49% of Future Coupons for ₹1,500 crore in August 2019. The company has argued that the 2019 deal prevents Future Group from selling shares of Future Retail to rivals in the retail space.
At the last Delhi high court hearing on 8 February, Future Group’s counsel Harish Salve rejected Amazon’s claim that it had tried to help Future survive its debt problems. 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…”
The Future Group presentation said: “FRL and Amazon have envisioned working together to make the most of this opportunity (the fast growth in retail industry) ahead. While covid has its adverse impact in the near term, it could be turned into a great opportunity. The potential for home delivery will be multifold through an integrated omni-channel play.”
“Covid has seriously impacted sales (and collections thereof) since March 2020 and thus FRL’s ability to meet its bank obligations. The accumulation of these liabilities leads to a cash deficit of over ₹5,000 crore till September 2020. This deficit is largely an outcome of ALM (asset-liability mismatch). FRL stakeholders have to decide among sale of assets/company or providing requisite financial support largely to correct ALM mismatch and thus not pursue any sale of assets,” reads the presentation.
The primary objective of the mutual decision between Amazon and Future was to hasten the process of bringing back normalcy in operations and putting Future Retail back on a path of growth and profitability maximization, the document showed.
Spokespeople for Amazon, RIL, SSG Capital, TPG Capital and Verlinvest did not respond to emails seeking comment.
A Future Group spokesperson denied there was any proposal from Amazon. “Future Group has never received any proposal from any such consortium—in fact, you have named existing investors in various Future Group companies, who we understand, are committed to and strongly support the ongoing Transaction,” the spokesperson said. “The entire story line in your mail is a figment of imagination and a mala fide attempt at misleading the public and stakeholders.”
A spokesman from Premji Invest said, “We don’t respond to media about our portfolio.”
The presentation shows two options under consideration during those crucial months for Future Retail.
One option would see FRL bringing in ₹5,500 crore financing with an appropriate mix of debt and equity. This would entail a restructuring of the board and management.
The other saw it initiating the sale of small stores, along with the group’s food, grocery and home and personal care businesses (except fashion). “Basis view and feedback of the stakeholders, this path can be seriously pursued,” said FRL in the documents.
The group of investors, including Amazon, Premji Invest, US-based special situations investment firm SSG Capital Advisors, Llc, TPG Capital, Belgium-based Verlinvest and a few others, agreed to invest at least ₹3,000 crore through an equity rights issue or preferential allotment. These investors were supposed to invest either through the existing funds (TPG, SSG and Verlinvest), the foreign portfolio investor route or through an Alternative Investment Fund (AIF). The presentation says one option would be for Amazon to invest through the AIFs of either SSG or Premji Invest. It’s unclear if and how such a transaction would have complied with foreign investment regulations in retail.
As an immediate step to take care of FRL’s dues until the completion of this plan, according to the presentation, Premji Invest, SSG and Amazon were ready to invest ₹750 crore in FRL through short-term loans and business advances, which could be adjusted later in the proposed ₹3,000 crore preferential allotment. “In case the three parties (Amazon, Premji Invest and SSG) have in-principle approval in the week of 18 May, we can call board meeting in the week of 25 May and announce select preferential (allotment),” FRL said in the presentation, adding this plan could help Future make significant progress towards achieving stability at the holding company of FRL.
