Amazon weighs direct investment in India’s future retail

MUMBAI • Inc is considering adding to its investment in Future Retail Ltd as the debt-ridden Indian retailer battles a cash crunch, according to people familiar with the matter.

Amazon, which holds an indirect stake of 1.3% in Future Retail, is in talks with the company’s parent Future Group over the potential stock purchase, said the people, who asked not to be identified as the information is private. The US online retail giant could raise its holdings in the retailer to as much as 49%, the people said.

As a purchase of more than a 25% stake could trigger an open offer under stock exchange rules, Amazon is considering lining up local investors to join the deal, the people said. Under India’s rules, foreign ownership in the so-called multi-brand retail trading industry — including department stores and supermarkets — is capped at 51%.

Shares of Future Retail rose 5% in Mumbai yesterday, ending a seven-day losing streak. The company has a market value of about 40.5 billion rupees (RM2.3 billion).

Future Retail’s dollar-denominated bonds due in 2025 jumped 8.3 cents yesterday to about 35.3 cents on the dollar. The move is the largest gain since the bonds were first sold in January, according to Bloomberg-compiled prices.

A change of ownership at Future Retail looms after the Biyani family, founders of Future Group, breached loan terms and came under pressure to sell their assets, Bloomberg News has reported.

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.

Amazon last year bought a 49% stake in Future Coupons Pte Ltd, which owned 2.7% of Future Retail as of December, according to Bombay Stock Exchange data. That gave Amazon an effective 1.3% stake in the retailer, based on Bloomberg News calculations. As part of the

Future Coupon agreement, Amazon has an option to acquire Future Coupon’s shares in Future Retail from the third year of the deal. Amazon also became the authorised online sales channel for Future Retail’s stores this year.

Deliberations are at an early stage and the companies can decide against any transactions, the people said. The Economic Times reported the potential deal yesterday. Representatives for Amazon and Future Group declined to comment. — Bloomberg