The Indian government has recently changed the FDI policy before which the e-commerce giant company Amazon had planned to acquire 9.5 percent stake in Future Retail, but they have dropped the plan due to new FDI rules and are now working on an alternative plan.
According to media reports, sources say that the popular e-commerce company Amazon is in its final stage to buy the stake in Future Coupons. Future Coupon is a coupon provider which is owned by Future Group promoter Kishore Biyani. Amazon is implementing this plan to make sure that it is agreeing with the new FDI policies that state that the company cannot have most of its stake in its sellers.
Amazon.com, the US-based e-commerce company was previously in talks to buy a stake in Future Retail. Future Retail operates more than 1200 stores which include stores like grocery, food and general retail. During February, Future Retail had mentioned that the company would be raising a fund of Rs. 2,000 crore by issue of warrants that will be based on Future Coupons preferences. This was planned so to get funds from Amazon in the Future Group Company, through which Amazon could have taken a stake of 8 percent in the Future Retail by combining equity and debt instruments. This could eventually help Amazon to hold on to the new FDI policy of the government.
Further, it should be recorded that, Future Retail acquires big brands and manages the operation of these brands, namely, Niligiris, BigBazar, and EasyDay. The Future Retail has established its presence in around 255 cities across 1,030 plus stores and holds a stake in half of supermarkets stores chains, and the company has a total retail space of 13.6 Mn sq ft.
As per the new FDI policy rule, Amazon needs to remove Shoppers Stop from its website because Amazon holds a 5 percent stake in the departmental chain which is against the new rule.
Amazon, in order to continue with its sales business on Cloudtail platform needs to reduce its stake in Amazon Asia from 49 percent to 24 percent especially in Prione Business Services which operated Cloudtail.
Recently, it was conveyed to Samara Capital by Competition Commission of India (CCI) to submit the details on the planned acquisition deal with Amazon, if it is with respect to the new FDI rules.
Future Retail had sanctioned the issuance and made allotments of 3.96 million warrants which could be converted into 3.96 million equity shares, each share is of Rs 2 and with a premium of Rs 503 each share to Future Coupons. Each warrant can be converted into a single equity share, and the conversion process can take place at any time within 18 months from the time of allotment, it was stated on February 4, 2019.
Amazon spokesperson said that they would not comment over the speculations about the steps they may or may not take in coming days.
However, the Amazon is negotiating with the Future Coupons and in its last stage to sign a deal which might be announced later in a month, other sources reported. Future is ready to announce its franchise partnership with 7-Eleven which is owned by Japanese; it is the world’s largest comfortable store chain.
Acquiring stake in Future Coupons news comes just after the giant US-based e-commerce companies Amazon and Walmart had invested in e-commerce companies of India. Both the companies will face a loss in market capitalization of around $50 billion since the launch of new FDI guidelines.