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Future Group fires fresh salvo against Amazon.com Inc

NEW DELHI :

Independent directors of Future Retail Ltd (FRL) have again asked the Competition Commission of India (CCI) to revoke its approval of a 2019 deal between a group company and Amazon.com Inc., alleging that the US retail giant hid facts from the regulator.

The directors have alleged that Amazon obtained CCI approval for its ₹1,431 crore investment in Future Coupons Pvt. Ltd (FCPL), for a 49% stake by making “deliberate misrepresentations” and “actively misleading” the antitrust watchdog.

Citing Amazon’s internal communications, the directors alleged that representations made by Amazon to CCI were “contradictory” to such correspondences, according to the letter submitted by the FRL independent directors to CCI that was uploaded on the exchanges on Sunday.

Amazon and the debt-laden Future Group are locked in a legal battle over the latter’s sale of its retail and wholesale assets to Reliance Industries Ltd’s (RIL’s) retail unit for ₹24,713 crore.

The Singapore International Arbitration Centre (SIAC) had dealt a blow to the cash-strapped Future Group by halting the deal.

The internal communication also said the number of equity shares of Future Retail to be held by Future Coupons Pvt. Ltd is such that Amazon can indirectly hold the same number of shares of Future Retail that it would have acquired if it had directly invested ₹1,400 crore in Future Retail at a price per share, representing a 25% premium on the minimum regulatory price prescribed for issuance of fresh shares of a listed entity under Indian law.

Amazon is paying a premium of 25% or ₹280 crore over the regulatory price of the securities of Future Retail, it said.

The letter by the independent directors to the Competition Commission states that originally Amazon was to invest directly in Future Retail through the foreign portfolio investment (FPI) route. However, restrictions arising out of the 2018 Press Note 2 notification, which prohibit e-commerce marketplaces from exercising ownership or control over sellers’ inventory on its platform, led to a change in the investment structure, with Amazon investing in a twin-entity investment structure.

Amazon thus invested in Future Coupons, with the latter acquiring 9.82% of Future Retail, giving Amazon an indirect control in the main retail entity of the Future Group. India follows strict rules for foreign retailers investing in homegrown retailers. The letter further said Amazon’s investment in Future Coupons is just used as a vehicle for investment in FRL.

“There is no valuation ascribed or carried for FCPL business per se,” it said. The documents show that Amazon never intended to invest in FCPL because of its “unique business model and strong growth potential,” it said.

The directors also alleged that Amazon paid a premium over their perceived valuation of Future Retail to acquire strategic rights over FRL.

The independent directors alleged that Amazon determined the price paid for the FCPL shares based on FRL’s valuation.

An email query sent to an Amazon spokesperson remained unanswered.

The move follows a 7 November letter by the company’s independent directors to the Competition Commission, claiming that Amazon has made misrepresentations and false representations to Competition Commission.

“Amazon sought and obtained the approval of the commission on the basis that it was investing in the business of Future Coupons and not on the basis that it was acquiring strategic, material, and special rights over Future Retail,” they had said then.

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