Shares of Future Retail were locked in at the 5 per cent upper circuit on reports that Amazon was set to hike its stake in the company.

On the BSE,the shares settled at Rs 76.80, marking a gain of Rs 3.65, or 4.99 per cent, over the previous close.

The spike in its shares came on reports that Future group chief Kishore Biyani may offload a major stake in Future Retail, which runs the Big Bazaar chain, to the US retailing giant as he looks to pare debt.

Last year, Amazon had acquired a 49 per cent stake in Future Coupons, a promoter entity which holds 2.72 per cent in Future Retail. The transaction thus gave the e-commerce giant an indirect stake of 1.3 per cent in Future Retail.

Bloomberg on Thursday reported that Amazon could raise its holding to 49 per cent and that it could also bring in local investors to join the deal.

Interestingly, last year while Amazon agreed to make an equity investment in Future Coupons for the 49 per cent stake (comprising both voting and non-voting shares), it was granted a call option.

This call option to the company allowed it to acquire all or part of the promoters’ shareholding in Future Retail and is exercisable by it between the third and tenth years, in certain circumstances.

The development comes at a time Future Retail has been adversely affected by the ongoing shutdown. Current rules allow 51 per cent foreign investment in multi brand retail.

On Wednesday, Fitch Ratings had assigned a final long-term issuer default rating (IDR) of CCC+ to Future Retail, indicating substantial credit risk.

The rating agency said Future Retail’s liquidity position at the end of the financial year was already strained following the company’s investment in fashion, home and general merchandise inventory — which is classified as non-essential item and can only be sold in limited circumstances under the current restrictions — ahead of the festival period, which is usually one of the prime sales periods annually.

This limited headroom when the Covid-19 shutdowns were enforced and the resultant reduction in the company's cash generation ability meant that Future Retails liquidity position became increasingly strained throughout April.