Future Group Considering the Sale of Major Stake in Future Retail to Amazon
The Future Group is reportedly considering the sale of significant stake in Future Retail to Amazon as the company attempts to pay-off its debts. The company is planning to demerge the food business of Future Retail into a separate business entity to make it compliant with India's FDI norms and facilitate the sale.
Amazon already holds an indirect stake of 1.3 percent in Future Retail as it owns 49 percent in the Future Coupons which owned 2.7 percent of Future Retail as of December, as per the Bombay Stock Exchange data. Amazon has an option to purchase shares of Future Coupon’s from the third year of the deal as part of the agreement. Currently, Amazon is the authorized online sales channel for Future Retail’s stores. The US e-commerce giant is in talks with the Future Group over the stock purchase which would increase its share in the Future Retail to 49 percent.
As per the India’s Foreign Direct Investment rules, foreign ownership in the multi-brand retail trading industry including the department stores and supermarkets is currently capped at 51 percent. As the purchase of more than a 25 percent stake triggers an open offer under stock exchange rules, Amazon is also considering local investors to join the proposed deal.
After the Biyani family, founders of the Future Group breached the loan terms, a change of ownership at Future Retail has loomed and therefore are under pressure to sell their assets. Future Retail has used half of emergency credit facility for working capital till last week. Lenders have allowed the firm to use 3 billion rupees of the 6.5-billion-rupee credit line. Future Retail currently has a market value of about 39 billion rupees. Shares of the company have fallen about 4.9 percent on Wednesday, extending their year-to-date loss to 79 percent.