Independent directors of Future Retail are set to turn down Amazon’s offer of financial support to the company through a deal with private equity firm Samara Capital. In a letter dated January 22, Amazon reiterated its willingness to financially assist Future Retail through the Samara Capital deal and also sought access to conduct due diligence of Future Retail in an expedited manner. However, the engagement, Amazon said, will proceed under the condition that the Rs 25,000 crore Reliance-Future Retail deal be called off.

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While an official response is set to go out on Monday, independent directors have declined the offer on grounds that Amazon hasn’t clarified to them how the proposed transaction is legally tenable and that Amazon has not yet ‘shown them the money.'

Amazon had first written to Future Retail’s independent directors on January 19 saying it is willing to assist Future Retail in addressing any financial concerns within the framework of agreements and that one solution is the proposed deal between Samara Capital and FRL – from 2020 – where Samara would invest Rs 7,000 crore in Future Retail. In this letter, Amazon also warned FRL from selling its small-format stores without Amazon’s consent, which it said would be in violation of the injunctions on Future Retail.

“Amazon has also become aware, from certain media sources, that FRL is proposing to sell its small-format stores, comprising the “Easyday” and “Heritage Fresh” brands. Please note that any sale of small-format stores without obtaining the consent of Amazon would be in violation of the injunctions which continue to operate and are binding on FRL and directors of FRL, including the independent directors of FRL,” Amazon wrote in its letter.

The independent directors on Friday responded to this letter seeking confirmation if Amazon can act on behalf of Samara Capital and has the authority to negotiate and finalize such transaction on its behalf.

It also sought clarity on the structure of the proposed transaction and if Samar Capital is owned and controlled by resident Indians.

“As you know, FRL is in the multi-brand retail sector, and FDI in this sector is restricted. You are also aware that Amazon’s transaction in Future Coupons, has resulted in regulatory scrutiny, including by the Competition Commission of India, as well as inquiries by the Enforcement Directorate. It is therefore critical that any investment being proposed is in compliance with all applicable laws, including FDI laws, CCI regulations, and Sebi regulations, and that any such transaction should not raise further regulatory scrutiny,” they wrote in the letter dated January 21.

They added that Future Retail is in urgent need of cash to repay Rs 3,500 crore by January 29, 2022, to lenders, failing which it will be in default, and had asked Amazon if it is willing to fund this amount by January 24. through an unsecured, long-term loan, subordinated to FRL’s existing lenders or any other mutually suitable and legally acceptable structure.

In its response on January 22, Amazon, while reiterating its willingness to help, said that Samara Capital remains interested to lead taking forward the term sheet dated June 30, 2020, which was at the time signed amongst Samara, FRL, and the Promoters of FRL. This deal proposes the acquisition of all retail assets of FRL, including the “small store formats” comprising the “Easy Day”, “Adhaar” and “Heritage” brands, through an Indian owned and controlled entity structure led by Samara and supported by Amazon for Rs 7,000 crore.

For this, it also sought to give Samara access to all financial, tax, regulatory, operational, licenses, assets, encumbrances, material contracts, material liabilities, material litigations, material investigations, and similar data which was shared with Reliance Industries to conduct due diligence of FRL.

While an official letter from Future Retail’s independent directors to Amazon is awaited, this comes at a time when Future Retail is also reportedly contemplating moving the Supreme Court to seek an extension for the repayments deadline of January 29 when it needs to repay Rs 3,500 crore to its lenders.

The Supreme Court too has reserved verdict on a bunch of pleas filed by Future Retail and Future Coupons on the long-drawn legal battle between Amazon and Future Group.

(Edited by : Pradeep Suresh V)