Samara Capital ready to invest Rs 7K crore in Future Retail: Amazon

US e-commerce giant Amazon has again written to the independent directors of Future Retail (FRL), including Gagan Singh, Ravindra Dhariwal and Jacob Mathew, expressing its willingness and ability to help FRL solve its financial problems. This included the solution offered in the term sheet between Amazon-backed private equity firm Samara Capital and FRL, in which the former contemplated an infusion of Rs 7,000 crore into the Kishore Biyani company.

Amazon contacted FRL in response to the retailer’s letter in which the company stated that it was willing to accept Amazon’s proposal but under certain conditions, and the evaluation of the proposal will be subject to FRL’s legal obligations.

Amazon also sent the letter to senior officials, including Ajay Tyagi, Chairman of the Securities and Exchange Board of India (SEBI), Ashok Gupta, Chairman of the Competition Commission of India (CCI), Sanjay Kumar Mishra, Chief Executive Officer of law enforcement and G Mahalingam, full-time member, Sebi. It was also sent to senior executives of Union Bank of India, Bank of India, State Bank of India, Bank of Baroda, Central Bank of India, Punjab National Bank, UCO Bank and Indian Bank.

“We are delighted that for the first time since our letter of December 2, 2020, the Independent Directors are willing to consider Amazon’s assistance in addressing FRL’s financial concerns,” said Amazon’s letter to the Independent Directors of FRL (dated January 22) which Trade standard reviewed. “We note that considerable time has been lost due to the reluctance of FRL and independent administrators to consider potential solutions facilitated by Amazon in the past. Nevertheless, we reaffirm our offer to assist the FRL within the scope of our rights under the agreements.

In this regard, Amazon confirmed that, based on FRL’s letter dated January 21, Samara Capital (Samara) has reiterated to Amazon that it remains committed to leading and advancing the term sheet dated June 30. 2020, signed between Samara, FRL and the promoters. of FRL, which is considering a purchase consideration of Rs 7,000 crore with the help and cooperation of the independent directors.

“Appropriately, Samara’s term sheet provides for the acquisition of all of FRL’s retail assets, including ‘small store formats’ comprising the ‘Easy Day’, ‘Adhaar’ and ‘Heritage’ brands. , through an entity structure Indian owned and controlled by Samara and supported by Amazon,” the Amazon letter reads.

Queries to Amazon and Future Group went unanswered until press time.

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Amazon further in the letter stated that its undertaking will in no way affect the binding nature of any injunctions issued in the arbitration proceedings and by the Indian courts, including with respect to the alienation/transfer/ the charge/disposal of FRL’s retail assets. Such engagement will be consistent with Amazon’s rights under the agreements.

“The transaction (“Disputed Transaction”) with Mukesh Dhirubhai Ambani (Reliance Industries Limited) Group (MDA Group) will not proceed or be implemented,” Amazon said in the letter. “All assistance would be through law-compliant structures.”

According to sources, as early as June 2020, the Amazon-backed private equity firm had signed a non-binding term sheet with FRL which involved an investment of Rs 7,000 crore. This was two months before Future Group, led by Kishore Biyani, announced its 24,713 crore (or $3.4 billion) merger deal with Reliance Industries (RIL) led by Mukesh Ambani in late August 2020. .

Amazon told FRL that the transaction contemplated in Samara’s term sheet would ensure the availability of funds in FRL at the earliest, through an asset sale and equity injection, which would be a direct antidote to FRL’s indebtedness.

Regarding the compliance of any structure with Indian law, Amazon stated that this structure is also similar to the proposed acquisition of the retail and wholesale business of Future Group (which includes the retail assets at FRL retail) by Reliance Retail and Fashion Lifestyle Limited.

“We understand that this entity has negligible business operations and whose parent entity Reliance Retail Ventures Limited has received at least Rs 47,265 crore from various overseas investors,” the letter reads. “We also understand that it is proposed to use this amount to fund the acquisition of FRL’s retail, wholesale and logistics assets.”

In fact, the transaction involving FRL and “the constituents of the MDA Group, namely Reliance Retail Ventures Limited and Reliance Retail and Lifestyle Fashions Limited, follows a strikingly similar structure. A comparison between the transaction structure in which Amazon made its investment and the structure involving Reliance Retail Ventures Limited and Reliance Retail and Lifestyle Fashions Limited is set out in Schedule I to the letter.

Amazon said it looks forward to the independent administrators immediately implementing the provisions set out in Samara’s term sheet, including providing Samara with the opportunity to perform FRL due diligence. Whether access can be provided with respect to all financial, tax, regulatory, operational licenses, assets, encumbrances, material contracts, material liabilities, material litigation, material investigations and similar data that have been shared with MDA Group, Samara is ready to start the due diligence exercise from Sunday, January 23, 2022 and complete it in an expedited manner.

“Given your request for urgent assistance, in order to expedite the process further, it would be helpful if all existing due diligence reports prepared by or on behalf of the FRL be made available to Samara by Sunday 1st Jan. 23, 2022,” Amazon said.

As in the past, Amazon said he remains available to facilitate discussions with Sumeet Narang, chief executive of Samara. Additionally, as noted in its January 19, 2022 letter, Amazon will facilitate meeting Narang on Sunday, January 23.

“Please provide us with the name and contact information of FRL’s authorized representative, who will attend the meeting and lead the engagement on FRL’s behalf with Samara so that binding commitments can be reached as soon as possible,” Amazon said.

“We also hope that you will cooperate in obtaining the necessary regulatory approvals,” he added.

FRL had set conditions for accepting Amazon’s proposal in a letter sent to the US e-commerce company dated January 21.

He said FRL was obligated to pay its lenders Rs 3,500 crore by January 29 and asked Amazon for its willingness to pay the amount by Monday, January 24. He asked if Amazon had the authority to act on behalf of Samara Capital to complete the transaction on its behalf. He said the management of Samara Capital should be owned and controlled by resident Indians to avoid regulatory scrutiny. Amazon had to confirm by Jan. 22 to agree to terms, including financing. FRL wanted a written confirmation from Amazon on how FRL can pay its dues and repay its lenders the full amount of approximately Rs 9,119.31 crore by March 2022. It told Amazon that its proposal for infusion (of Rs 7,000 crore) for FRL in the letter is significantly less. FRL alleged that Amazon was trying to prevent Future from monetizing its assets and repaying lenders.

Amazon’s letter stated that MDA Group was permitted to conduct due diligence in preparation for its transaction beginning April 23, 2020, although the disputed transaction ultimately closed on August 29, 2020. Amazon said, although understands that the disputed transaction did not result in any immediate injection of funds into FRL, it should be noted that if the Samara term sheet were implemented and the transactions contemplated therein were completed, FRL would have received up to Rs 7,000 crore as stipulated in the Samara term sheet in the middle of September 2020 itself (i.e. within 2 months of execution of the Samara term sheet), avoiding as well as any impending financial crisis or funding need that the FRL may face.

“We reaffirm that FRL’s retail assets may not be alienated/transferred/encumbered/disposed of in any way without Amazon’s consent,” Amazon said. “Appropriately, the circular issued by the Reserve Bank of India dated August 6, 2020 does not impose or require any sale of assets of FRL.”

Amazon has also requested FRL to consider recovering/generating up to Rs 4,303 crore by unwinding transactions relating to outstanding advances and security deposits in accordance with FRL’s audited financial statements.

Response by Amazon’s new letter dated January 22, 2022 to the conditions set by FRL:

  • Amazon’s willingness to offer financial assistance to the FRL, including a proposal for an infusion of Rs 7,000 crore led by an Indian owned and controlled entity structure headed by Samara.

  • The transaction contemplated in the Samara Term Sheet would ensure the availability of funds in FRL at the earliest.

  • To comply with Indian law, Amazon’s proposal is similar to the proposed acquisition of Future’s assets by Reliance Retail and Fashion Lifestyle Limited.

  • Samara is ready to begin the due diligence exercise from Sunday, January 23, 2022. It would be helpful if any existing due diligence reports prepared by or on behalf of FRL be made available to Samara.

  • Available to facilitate discussions with Sumeet Narang, General Manager of Samara, on Sunday, January 23, 2022.

  • The letter stated that MDA Group (Mukesh Dhirubhai Ambani) was allowed to carry out due diligence in view of its transaction from April 23, 2020, although the disputed transaction was finally concluded on August 29, 2020.

  • Amazon is of the opinion that if the Samara term sheet was implemented, FRL would have received up to Rs 7,000, crore by mid-September 2020 itself within 2 months of the execution of the Samara term sheet ), thus averting any impending financial crisis that FRL faces. .

  • The letter reiterated that FRL’s retail assets may not be alienated/transferred/encumbered/disposed of in any way without Amazon’s consent. Otherwise, any proposal made by FRL to do so would result in appropriate consequences under the law.

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