Amazon Urges SEBI To Investigate Future Retail Annual Reports

The years-long battle between Amazon and Future Retail Ltd (FRL) has taken a new turn with the ecommerce giant urging the Securities and Exchange Board (SEBI) to investigate FRL for sharing false liquidity crunch information and outstanding liabilities. 

Amazon reportedly alleged that FRL has made a false statement in its annual report of 2020-21 stating that it has a huge outstanding pertaining to lease payments of store premises.

In its letter to SEBI, Amazon wrote that FRL “face a significant liquidity risk with regards to its lease liabilities, as the current assets are sufficient to meet obligations to lease liabilities as and when they fall due”.

In the letter, the ecommerce giant stated that FRL has violated SEBI Regulators, 2015 (Listing Obligations and Disclosure Requirements), and SEBI Regulations, 2003 (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market). SEBI is obligated to protect the interest of investors in securities and to regulate the securities market. 

Prior to this, Amazon challenged FRL’s move to sell assets to Reliance Industries’ retail arm. The deal had fallen through as a vast majority of stakeholders voted against it. 

Earlier in March, Reliance Industries took control of hundreds of FRL’s Big Bazaar stores for not paying rent. 

When Out-Of-Court Settlement Fallen Flat

According to an Inc42 report, earlier in March this year, Amazon and Future Retail agreed to hold discussions outside the court to resolve their legal disputes but nothing has come out of it. 

The discussions were made to resolve the lawsuit that was filed by Amazon against Future Retail for transferring assets to Reliance Industries despite being outlawed to do that.  

At the hearing, Amazon counsel Gopal Subramanium suggested that the two sides should negotiate, saying the “whirlpool of disputes fought on multiple fronts had been dragging on for too long.”

The tussle between Amazon and Future Group has been going on for more than a year now. Owing to which, the asset sale transaction between Future Group and Reliance Industries for worth $3.4 Bn assets has halted.  

The ecommerce giant stalled Future’s deal with its competitor, Reliance Industries after citing violation of contracts. Its stance is supported by Indian courts as well as a Singapore arbitrator.     

Two months ago, Reliance Industries began taking possession of nearly 500 stores of Future Retail. As a part of the move, it is also rebranding those stores as its own outlets. 

How All It Started

The dispute between Amazon and Future Retail began in August 2020 when Kishore Biyani-led company signed a MoU with Reliance Retail for the sale of its consumer retail arm for INR 24,713 Cr due to bankruptcy.

Previously, in September 2019, Amazon held 49% stake in Future Coupons, a subsidiary of Future Group that owns 7.3% stake in Future Retail. With this deal, the ecommerce giant, Amazon infused Future Retail via twin entity investment, thus, acquiring 3.58% of the business.

With this move, Amazon craved a way to invest in the Indian retail ecosystem despite CCI not allowing FDI engagement in the Indian retail sector. 

Deets of the deal between Amazon and Future Retail later surfaced when the ecommerce giant mentioned a list of 30 entities with whom Future Coupons could not transact, including Reliance Retail. In this manner, Future Retail was forbidden to sell its business to Reliance Retail.