Amazon has confirmed to Future Retail Ltd (FRL) that Samara Capital is willing to invest Rs 7,000 crore in the company — but has not answered some of the key issues raised by the debt-ridden retailer which desperately needs funds to avoid being classified as a defaulter.
The US retail giant wrote yet another letter to the independent directors of the Kishore Biyani-group company on Saturday in response to a communication sent by Future on January 21.
In the latest letter, Amazon said Samara is keen to follow up on the term sheet signed in June 2020. However, it is not clear whether this was communicated by Samara to Amazon even as questions arise as to why the private equity firm is not confirming this directly to FRL.
“We confirm that based on your letter dated January 21, 2022, 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),” Amazon said in the letter.
The term sheet provides for the acquisition of all the retail assets of FRL including small format stores which comprise the Easy Day, Aadhaar and Heritage brands.
Amazon said the structure of Samara will meet domestic regulations as the acquisition will be done through an Indian-owned-and- controlled-entity structure.
Amazon maintained in the January 22 letter to Future that, “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 further added that the engagement with Samara will not affect the binding nature of the injunctions passed in the arbitration proceedings and by the Indian courts over the transfer or encumbrance of FRL’s retail assets.
It, however, pointed out that the new transaction will have the understanding that “the transaction with the Mukesh Dhirubhai Ambani (Reliance Industries) group will not proceed and not be acted upon; and all assistance would be done through legally compliant structures”.
In August 2020, Ambani’s Reliance Retail has offered to buy Future Retail in a Rs 24,713cr deal. Amazon has opposed the deal, which is now in the courts.
Amazon observed that that the structure with Samara in place 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 Ltd (RRFLL), while also noting that t the deal between FRL and Reliance follow a “strikingly similar structure”.
“If access can be provided in relation to all financial, tax, regulatory, operational, licenses, assets, encumbrances, material contracts, material liabilities, material litigations, material investigations and similar data which was shared with the MDA Group, Samara is ready to commence the due diligence exercise from Sunday, January 23, 2022, and complete it in an expedited manner,” Amazon said.
The FRL independent directors in their letter had also disclosed that the aggregate liabilities of the company is Rs 9119.31 crore for interest and principal repayments to lenders up to March 2022, which includes the payment of the overdue amount of Rs 3,494.56 crore and Rs 2,908 crore for operations up to March 2022.
Here, the Amazon letter was also not clear on whether it would also help with the remaining amount. It had earlier said that FRL can generate up to Rs 4,303 crore by recovering Rs 1,848 crore advances which are pending and Rs 2,455 crore with regard to security deposits.