Amazon accuses Future Retail of ‘financial irregularities’, writes to independent directors

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New Delhi, November 25: Amazon has written to the independent directors of Future Retail Ltd (FRL), alleging “significant financial irregularities”, and said it is “full of facts” and related party transactions between FRL and other Futures. thorough and independent investigation”. group organizations. However, the FRL has claimed that the US e-commerce major has no where to address the letter, and that Amazon’s communication is “nothing but an afterthought and a counter-explosion”, which was a counter-argument by the Competition Commission. Show cause notice. India (CCI).

Amazon, in its letter dated November 24 to independent directors, said that FRL entered into frequent “significant related party transactions” with various Future Group entities, including Future Enterprises Ltd., Future Supply Chain Solutions Ltd., Future 7-India Convenience Ltd. Is. Others, and some of these related parties, primarily depend on FRL for their business. “… Members of the Audit Committee (current and past members) have expressed concerns regarding the financial management of FRL, including related party transactions, despite raising substantial equity and debt funds through December 2019 and January 2020.

“The audit committee also proposed an investigation by an independent third-party expert to determine the reasons for the increase in FRL’s debt,” Amazon said in its letter. Attention of independent directors so that they – “consistent with their statutory and fiduciary obligations” – can evaluate and investigate these issues in detail in the interests of public shareholders, creditors, bankers and third party suppliers of FRL.

When contacted, a Future Group spokesperson said that Amazon is not a shareholder or creditor of FRL, and has no where to address the letter. “Amazon’s letter is nothing but a consideration and counter to the show cause notice by CCI against Amazon pursuant to a complaint by Future Coupons Pvt Ltd (FCPL) of withdrawal of CCI’s approval for Amazon’s investment in FCPL”. is action.

“The allegations contained in Amazon’s letter are being made as part of a legal dispute, which is being settled by the Supreme Court, the High Court and other regulatory fora,” the spokesperson said. The spokesperson further said that the FRL Board had constituted a Crisis Management Committee to deal with the situation arising out of the COVID-19 lockdown, nationwide store closures and sale of pledged shares affecting all aspects of the company’s functioning. .

The spokesperson added that all related party transactions and usage of funds are on record and are part of the public disclosures made by the company as part of standard governance practices. “There is nothing new which is being brought to notice, except for the false speculations being made from selected excerpts of these documents. The spokesperson said that instead of relying on these baseless and malicious allegations, the motivation behind these allegations and the timing of the same should be understood.

Amazon did not comment on the issue. Notably, independent directors of FRL have written two letters to the CCI, citing internal communications of Amazon and Amazon-Future Coupons Pvt Ltd (FCPL) to establish their ‘conflicting’ statements before the courts and anti-monopoly body. had sought approval. ) deal.

He accused Amazon of presenting “completely contrary information” that was “contradictory” to Amazon’s own internal communications regarding the US giant’s 2019 investment in FRL’s promoter company. CCI will meet representatives of Amazon and Future Coupons Pvt Ltd (FCPL) in connection with the matter in January next year.

Amazon and Future Group are battling it out in courts after Kishor Biyani-led conglomerate in August last year agreed to sell their assets on a sale basis to billionaire Mukesh Ambani’s Reliance Retail for Rs 24,500 crore. Amazon has objected to the sell-off plan, accusing Future Group of violating its 2019 investment agreement. Future Coupons was established in 2008 and is engaged in the business of marketing and distribution of Gift Cards, Loyalty Cards and other Rewards Programs to Corporate Clients.

Amazon had approached the Singapore International Arbitration Center (SIAC) as well as Indian courts in this matter. In its letter to independent directors, Amazon shared the data, pointing to “significant financial irregularities” to the prejudice of public shareholders, banks, creditors and third-party suppliers that all pertinent facts and details of related party transactions are deeply and Guarantees independent investigation, including previous financial years, through reputed independent agency.

“Given the nature of the disclosure and findings, a careful and detailed investigation should be conducted by the statutory authorities/regulators/enforcement agencies to examine and examine the financial statements and records, including related party transactions and discussions and audits in the Board.” The committee is comprised of meetings in the interest of public shareholders, banks, creditors and third party suppliers,” the letter added. Amazon said it will endeavor to provide further material, if possible, to independent directors and statutory officials to assist in their investigation.

Amazon also wrote to the CCI, requesting it to “act in aid of the binding injunctions acting against FRL, FCPL and Biyani with reference to the EA (emergency arbitrator) order and the order on the vacant application and to immediately recall the observation letters”. In October last year, an interim award was passed by EA in Amazon’s favor, requiring FRL to take any steps to dispose of or forfeit its assets or issue any securities to secure any funding from a restricted party. was stopped from

Amazon claimed in the letter that FRL and Future Enterprises Ltd (FEL) have entered into several “significant related party transactions” over the years. A capital advance of Rs 3,560 crore was given by FRL to FEL at a time when businesses were taking mitigation measures due to the pandemic, including but not limited to conservation of cash, Amazon said.

“In the same financial year 2019-2020, FRL purchased a significant amount of goods and services from FEL to the tune of Rs 3,472 crore.” “Therefore it is clear that around Rs 7,000 crore of transactions were done between FRL and FEL in a financial year.” This was continued in FY2020-21, where FRL has purchased goods and services from FEL for an amount of Rs 6,820 crore at a time when FRL claims to be under significant financial stress due to the pandemic, it said. “It is for independent directors to examine whether such transactions entered into by FRL and FEL, including related parties (directly or indirectly, or through a series of transactions), are in the best interest of FRL, at arm’s length. and were driven by fiscal prudence, especially as FRL is reportedly facing a financial crunch at this point in time,” Amazon said.

Amazon also claimed that FRL could generate up to Rs 4,303 crore by recovering Rs 1,848 crore in advance and Rs 2,455 crore extraordinary security deposit, even when there was no increase in the number of stores. This amount can be used to immediately partially repay the outstanding debt of banks and creditors to ensure business continuity and its survival, the letter said. FRL “may recover / generate up to Rs 4,303 crore by opening transactions that do not appear to have prudent commercial substance and are in the best interest of FRL, its public shareholders, banks, creditors and third party suppliers,” it said. .

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