Samara Capital Offers Rs.7,000 Cr for Future Retail

In a new twist to the Amazon / Future Retail stand-off, the former has written to all the independent directors of Future Retail reiterating the commitment of Samara Capital to invest Rs.7,000 crore in Future Retail. Amazon has written to Gagan Singh, Ravindra Dhariwal and Jacob Matthews who are independent directors on the board of Future Retail.

Samara Capital is a private equity firm backed by Amazon. Back in 2020, Samara had given a non-binding term sheet to Future group regarding its commitment to invest Rs.7,000 crore into Future Retail. However, this offer is much lower than the Reliance offer of Rs.24,700 crore, albeit for a much broader relationship.

The urgency of the situation arises from the fact that Future group needs to pay Rs.3,500 crore to the banks and other lenders before the end of January if it has to prevent its debts from being classified as NPAs. Classification as NPAs would mean that the banks will have to make substantial provision for these Future group outstanding amounts.

Apart from writing to the independent directors of Future Retail, Amazon has also marked copies of the letter to SEBI, the Competition Commission of India (CCI), the Enforcement Directorate, the stock exchanges and also to banks like Union Bank, Bank of India, SBI, BOB, Central Bank of India and PNB, that are part of the lending consortium.

The issue would be the structure but Amazon is quite clear that the extant FDI rules would not be breached. The deal would be done by an Indian company with Indian domicile with the backing of Samara Capital. This would still mean an indirect backdoor entry for Amazon into Future Retail and it remains to be seen how the regulators interpret the same.

However, in private conversations, the independent directors have already said that the offer was not tenable for the company. Firstly, the offer was less than one-third of what was being offered by Reliance Retail and there was no way the debts could be managed with that consideration. Secondly, the existing legal restrictions on foreign ownership of retail are quite strict and FRL would not be keen on further legal hassles.

The missing link is the due diligence and Amazon and Samara want the same access to information and data given to Reliance Retail Ventures. However, FRL directors are of the view that a very elaborate due diligence had already been done by the Reliance group and there was not much of a point in reinventing the wheel. Irrespective of the outcome, the issue is that time is rapidly running out for the Future group.