A week after they first wrote to CCI, Future Retail Ltd.’s independent directors have written a second letter to the competition regulator – this time providing pre-deal email exchanges and a draft shareholder agreement to bolster their allegations that Amazon mis-represented the deal with Future Group when seeking regulatory approval.
Ravindra Dhariwal, Jacob Mathew and Gagan Singh are the three independent directors on the board of FRL, chaired by Kishore Biyani.
The directors say Amazon represented to the Competition Commission of India that its decision to invest in Future Coupons Pvt. Ltd. was based on FCPLS’s unique business model and growth potential. And that any rights it had in FRL via FCPL were to unlock value for FCPL. Whereas, according to the directors, emails show that Amazon used the FCPL route to invest in FRL, which it could not do directly due to restrictions in India’s foreign direct investment policy. And that the multiple agreements with FRL and FCPL were in fact all part of one transaction. Hence, CCI should revoke its approval to the deal.
The emails, particularly one of them from Rakesh Bakshi, the legal head at Amazon India to Jeff Bezos, then chief executive at Amazon, show that the American e-commerce giant’s investment interest lay mostly in FRL, the independent directors claim.
In that letter, also filed with the stock exchanges, Bakshi writes “Due to the recent PN2 restrictions under Indian foreign investment laws, we will use a “twin-entity investment” structure to invest in Future Retail…”
The letter is focused on the virtues of FRL, and barely refers to the business conducted by FCPL, the directors argue.
Even the price paid by Amazon for the shares of FCPL was determined on basis of the valuation of Future Retail Ltd, they claim, citing the letter.
This is one of many emails between legal and corporate teams at Future Group, Amazon and law firms Trilegal, AZB & Partners and Cyril Amarchand Mangaldas during the period September, 2018 to June, 2019. The filing also includes a draft shareholders agreement dated 2018 between Amazon, FRL and Kishore Biyani and family members constituting the promoter group.
This is the second time FRL’s independent directors have written to the CCI seeking revocation of approval of the deal with Amazon on grounds the e-commerce giant had not revealed its true intent to the regulator regarding its investment in FCPL. The investment was to indirectly obtain strategic rights and hence control over FRL, the directors allege. Such control, over a retailer, if properly revealed, may have at the least triggered an open offer under SEBI regulations, or worse still violated India’s FDI policy at true intent, the directors claim.
In 2019, Amazon had invested in Future Group by acquiring a 49% stake in FCPL — a promoter entity of Future Retail. According to the shareholders’ agreement, Amazon was granted a call option allowing it to acquire all or part of the promoters’ shareholding in Future Retail, which could be exercised between the third and tenth years in certain circumstances subject to applicable law.
At that time, FRL, FCPL and Kishore Biyani companies also entered into a shareholders agreement. Under this, FRL was required to obtain prior consent of FCPL for certain key matters including disposal of its retail business and assets to any third party and particularly to certain restricted persons including Mukesh Ambani’s Reliance group.
In 2020, the financially strapped Future Group struck a deal with Reliance Retail Ventures Ltd. to sell most of its retail assets to the Mukesh Ambani-led retail giant.
Amazon sought to block the transaction on grounds that it violated its rights in FRL. It won an emergency arbitral award but has since been fighting Future Group entities in several Indian courts.
BloombergQuint has sought a comment from Amazon on these representations by FRL’s directors.