(This is an opinion published on Bloomberg)
Two of the world’s richest men, fighting a near-bankrupt Indian retailer, have made so much noise that its board has lost its sleep. In less than a week, three independent directors of Future Retail Ltd. has sent two letters to the country’s competition authority, alleging that Amazon.com knowingly misled the regulator about the true nature of its 2019 investments in the relevant entity. They want the antitrust watchdog to cancel the transaction.
Future Retail’s $2025 bonds rose slightly on Monday, although they are still trading at 61 cents against the dollar. Based on what an arbitration tribunal in Singapore has to say on the issue of alleged misrepresentation by Amazon, the maneuver looks like a long shot. But no one can predict the course of regulatory action in India. If the gamble is successful, Asia’s richest businessman, Mukesh Ambani, may be able to get his hands on Future’s retail stores Amazon owner Jeff Bezos has so far managed to block using judicial proceedings. Eliminating Amazon’s investment would leave the US retailer with no valid contract to prevent the sale of assets to Ambani.
It is rare for Indian boards to question the validity of the agreements they are in. But then again, the stakes are high in the battle of Ambani vs. Bezos. The results may go either way towards determining which of the two billionaires will ultimately control India’s $800 billion retail market. It’s not a war the directors can sit through – not under the burden of liabilities worth 190 billion rupees ($2.5 billion) with Future sinking, and relentless losses that jumped 80% from six months a year ago to September .
Future of Future, the leader in modern mass retailing in India, started a while back. $192 million Amazon paid for 49% interest in founder Kishore Biyani’s Future Coupons Pvt. Indirectly, approximately 10% of publicly traded Futures Retail, at a premium to the prevailing share price. Amazon, which apparently gave money to coupons to invest in debt-laden retail, insisted on a list of restricted parties that physical stores could not be sold without the e-commerce giant’s permission. Ambani’s name was on the list, and that’s why Bezos launched arbitration proceedings for breach of contract after Future hit India’s No. 1 retail tycoon for a fresh $3.4 billion defense after last year’s pandemic hit. Brought it
But now the director is dishonest by claiming that he was aware of the banned list, but was not aware that Amazon’s small stake in Future effectively controlled it. They say this would be in violation of India’s 2018 foreign investment law, which forbids e-commerce marketplaces from investing in a firm that sells goods on its platform. “We didn’t know it was actually Amazon that was running Future Retail,” independent director Ravindra Dhariwal told BloombergQuint. “We were misled by Amazon, we were blinded to commit an illegal act.”
An Amazon spokesperson declined to comment, although it is unclear exactly how the Seattle-based firm may have misled the board of Future Retail, which received advice from its own lawyers. It’s also not immediately clear whether the director’s letter reveals something completely new. In its partial decision last month, the Singapore Arbitration Tribunal took a detailed look at the issue of alleged misrepresentation by Amazon. Amazon did not “conceal its interest in Future Retail” from the Competition Authority of India, the panel said, disclosing the “negative, protective, exclusive and material rights” that would accrue to Amazon, as well as the fact that the proposed combination Including Future Retail.
Though Ambani’s Reliance Retail Ventures Ltd has extended the deadline to complete the long-pending acquisition to March 2022, the window to save the deal is closing. The Singapore Tribunal has ruled that the Indian retailer is a party to the shareholders’ agreement between Amazon and Future Coupons, even though it itself is not a signatory. At the same time, a pandemic-related moratorium on its loan repayments ended in September. Banks will start receiving payments from January.
As the directors shared their second petition to the antitrust watchdog with stock exchanges on Sunday, they also signed off on the company’s semi-annual financial results. They look terrible. The equity cushion of $147 million that existed in March has disappeared. It has been replaced by a $164 million hole on the balance sheet. No wonder the board has suddenly become very awake and hyperactive.
Two of the world’s richest men, fighting a near-bankrupt Indian retailer, have made so much noise that its board has lost its sleep. In less than a week, three independent directors of Future Retail Ltd. has sent two letters to the country’s competition authority, alleging that Amazon.com knowingly misled the regulator about the true nature of its 2019 investments in the relevant entity. They want the antitrust watchdog to cancel the transaction.
Future Retail’s $2025 bonds rose slightly on Monday, although they are still trading at 61 cents against the dollar. Based on what an arbitration tribunal in Singapore has to say on the issue of alleged misrepresentation by Amazon, the maneuver looks like a long shot. But no one can predict the course of regulatory action in India. If the gamble is successful, Asia’s richest businessman, Mukesh Ambani, may be able to get his hands on Future’s retail stores Amazon owner Jeff Bezos has so far managed to block using judicial proceedings. Eliminating Amazon’s investment would leave the US retailer with no valid contract to prevent the sale of assets to Ambani.
It is rare for Indian boards to question the validity of the agreements they are in. But then again, the stakes are high in the battle of Ambani vs. Bezos. The results may go either way towards determining which of the two billionaires will ultimately control India’s $800 billion retail market. It’s not a war the directors can sit through – not under the burden of liabilities worth 190 billion rupees ($2.5 billion) with Future sinking, and relentless losses that jumped 80% from six months a year ago to September .
Future of Future, the leader in modern mass retailing in India, started a while back. $192 million Amazon paid for 49% interest in founder Kishore Biyani’s Future Coupons Pvt. Indirectly, approximately 10% of publicly traded Futures Retail, at a premium to the prevailing share price. Amazon, which apparently gave money to coupons to invest in debt-laden retail, insisted on a list of restricted parties that physical stores could not be sold without the e-commerce giant’s permission. Ambani’s name was on the list, and that’s why Bezos launched arbitration proceedings for breach of contract after Future hit India’s No. 1 retail tycoon for a fresh $3.4 billion defense after last year’s pandemic hit. Brought it
But now the director is dishonest by claiming that he was aware of the banned list, but was not aware that Amazon’s small stake in Future effectively controlled it. They say this would be in violation of India’s 2018 foreign investment law, which forbids e-commerce marketplaces from investing in a firm that sells goods on its platform. “We didn’t know it was actually Amazon that was running Future Retail,” independent director Ravindra Dhariwal told BloombergQuint. “We were misled by Amazon, we were blinded to commit an illegal act.”
An Amazon spokesperson declined to comment, although it is unclear exactly how the Seattle-based firm may have misled the board of Future Retail, which received advice from its own lawyers. It’s also not immediately clear whether the director’s letter reveals something completely new. In its partial decision last month, the Singapore Arbitration Tribunal took a detailed look at the issue of alleged misrepresentation by Amazon. Amazon did not “conceal its interest in Future Retail” from the Competition Authority of India, the panel said, disclosing the “negative, protective, exclusive and material rights” that would accrue to Amazon, as well as the fact that the proposed combination Including Future Retail.
Though Ambani’s Reliance Retail Ventures Ltd has extended the deadline to complete the long-pending acquisition to March 2022, the window to save the deal is closing. The Singapore Tribunal has ruled that the Indian retailer is a party to the shareholders’ agreement between Amazon and Future Coupons, even though it itself is not a signatory. At the same time, a pandemic-related moratorium on its loan repayments ended in September. Banks will start receiving payments from January.
As the directors shared their second petition to the antitrust watchdog with stock exchanges on Sunday, they also signed off on the company’s semi-annual financial results. They look terrible. The equity cushion of $147 million that existed in March has disappeared. It has been replaced by a $164 million hole on the balance sheet. No wonder the board has suddenly become very awake and hyperactive.
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