Kishore Biyani, Future Coupons promoters write to Amazon, accuse it of not helping

Kishore Biyani, Future Coupons promoters write to Amazon, accuse it of not helping

Due to a lack of response from Amazon, the letter says, Future Group started parallel discussions with other potential investors including Reliance.

Amazon made no serious or genuine efforts to help Future Group find investors or capital, the promoters of Future Coupons (FCPL) alleged in a letter written to the e-commerce major. As Future Group, Reliance and Amazon await a response from markets regulator SEBI over the proposed Future-Reliance Retail deal, Future Corporate Resources (FCRPL), Future Group Chairman Kishore Biyani and other Promoters of FCPL have written to Amazon over the dispute. Future Group and Amazon have been locked in a legal battle after the latter objected to Future Group selling its retail and wholesale businesses to Reliance Retail.  

In a letter addressed to ‘ NV Investment Holdings’, the letter starts by denying all allegations made by Amazon of a breach of a shareholding agreement (SHA) between both parties. Amazon invested nearly Rs 1,500 crore in Future Retail’s (FRL) promoter entity Future Coupons for a 49% stake in August 2019.

“Accordingly, the allegations of breaches under the FRL SHA made by you, are ludicrous and warrant no response,” the letter states. In the letter, the company and promoters wrote that Amazon was aware of Future Group’s operations, its liabilities and debts at the time of entering into a deal.

The letter states that Amazon was aware that as part of FRL shares pledged for borrowing from lenders, a security cover for a certain part of the outstanding loan amount was to be provided at all times. If that security cover was to reduce, it would need to be topped-up and any such action would not be a breach of the shareholders agreement between Amazon and Future Group.

As per the letter, the promoters of Future Coupons borrowed around Rs 10,000 crore from various lenders, including banks like Vijaya Bank, Syndicate Bank, Punjab National Bank, Central Bank of India and financial institutions such as IFCI Limited.

“Consequently, your awareness, at all times, of the risks associated with the existing loan documents, cannot be lost sight of. It therefore follows that the FCPL SHA was signed subject to the existing loan documents,” the letter states.

While claiming that the deal also required Amazon’s support in protecting the shares of FRL, Future Group alleges that Amazon made no ‘serious or genuine efforts’. This, the letter claims, absolved Future Retail and promoters of all obligations under the SHA.

“In fact, during the period March to August 2020, all your actions lacked good faith. Except for offering lip service and perfunctorily attempting to show your concern, there were no serious or genuine efforts made by you,” the letter states.

“The correspondence during this period bears out that you really had no intention to assist the Promoters/FCPL in preventing the alienation or disposal of the FRL shares. What you merely did, was put up a façade of “facilitating” the raising of finance by the Promoters,” the letter adds.

As per the letter, the COVID-19 pandemic and the lockdown in March 2020 was beyond the Promoters’ control and that Future Retail’s sales dropped significantly, and it wasn’t able to find lenders at the point due to falling revenues and increasing costs and debts, also leading to the company’s shares plunging.

At this point, the letter states that Amazon was first informed about the situation on March 16, 2020 as per terms of the deal, but Amazon didn’t call for an RFI (Request for Information).

An RFI is usually the first step in understanding the market and potential suitors for a deal.

“It is, however, a matter of record that you failed to nominate any RFIs . No written intimation to this extent was even sent by you. Your failure to exercise this right, when the circumstances warranted the same, contributed to the loss of control over the Promoters’ FRL Securities,” the letter states.

With the debt amounting to Rs 11,250 crore as of June 30, 2020, the letter claims that there was tremendous pressure from lenders to restructure the businesses, failing which they would be compelled to initiate action and that any such action would have resulted in the collapse of the entire business.

“In such dire circumstances, you were not expected to sit on the fence by simply calling for information and data and doing nothing to prevent the alienation and disposal of the Promoter FRL Securities. The least you could have done, was to nominate RFIs as soon as possible, or within reasonable time. By not nominating any RFIs, you contributed to the deterioration of the asset value of Promoters FRL Securities,” the letter further adds.

Due to a lack of response from Amazon, the letter says, Future Group started parallel discussions with other potential investors including Reliance, and that Amazon was apprised of the same.

“If the transaction with the Reliance/MDA Group was not finalised, FRL would inevitably have faced insolvency and/or liquidation, in which event, the entire equity would have been wiped out, leaving you with nothing. We therefore deny having acted for personal gain, as alleged or at all. We have, in fact, acted in public interest, namely, in the interest of the banks, other lenders, and public shareholders. We have also ensured that the investments of FCPL continue to remain encumbrance free,” the letter adds.

The letter also added that Amazon didn’t refer to the complete chain of communications through emails, text and WhatsApp messages, and oral discussions and presentations while making allegations.

These communications, the company says, will show that the company put-forth various alternative proposals, including a proposal to increase Amazon’s effective shareholding in FRL from 4.8% to 19.1%, by investing an additional Rs 1,470 crore. It also states that it explored the possibility of forming a consortium of financial institutions including other investors (such as PremjiInvest), who wanted Amazon’s participation, which it did not consent to, stating FDI laws as the reason.

“The only irresistible conclusion is that neither were you interested in making further investment, nor were you in a position to find an alternative investor to do so, leaving us with no choice to save FRL from ostensible liquidation,” the letter states. 

Published at Mon, 04 Jan 2021 14:34:52 +0000

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Written by Riel Roussopoulos


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