Amazon Inc. is considering to add up or increase its stake in Future Retail Ltd. The company has taken too many debts and is facing cash-crunch and hard time paying off.
Amazon is in conversation with the parent company that is Future Group, about the reasons behind the potential stock purchase. It has an indirect stake of about 1.3% in Future Retail Ltd. The U.S giant retailer is planning to raise its holdings from 1.3% to 49% in Retail, sources say.
The stock exchange rules can be highly experienced as an open offer because a purchase of about 25% triggers the market. Under India’s rules, foreign ownership in the multi-brand retail trading industry – including department stores and supermarkets – is capped at 51%. And so, Amazon is considering various local investors to be included and be a part of the deal.
The share prices have certainly increased after Thursday by 5%, ending the seven-day continuous fall. The company has a market value of about 40.5 billion rupees ($535 million). Future Retail’s dollar-denominated bonds due in 2025 jumped 8.3 cents on Thursday to about 35.3 cents on the dollar. The move is the largest gain since the bonds were first sold in January, according to sources.
The world’s strictest shelter-at-home restrictions have hurt consumption in India, putting Asia’s third-largest economy on course for a rare contraction. Pressurising the founders of Future Groups to change their ownership, breached loan terms and have their situation to sell their assets and wind up.
But like before, for Future Coupons Pvt Ltd, Amazon bought a 49% stake which owned 2.7% in Future Retail and as part of Future Coupon agreement, Amazon has right to acquire shares in Future Retail from the third year of deal and has also become the authorized sales channel of Future Retail’s this year. In simple words, Amazon was at rescue for Future Group at the right time.
Future Retail has used about half of is emergency fund as working capital. Lenders allowed the firm to draw 3 billion rupees of the 6.5 billion rupees.