An employee takes stock of stacked products at an Amazon warehouse in Bangalore. Photo: AFP

Amazon’s move to prevent Future Group from selling its assets to Reliance Group, owned by India’s richest man Mukesh Ambani, suffered a setback after the cash-strapped Indian retailer turned down the US e-commerce giant’s offer for financial support.

In recent days, Amazon had written to Future Retail’s independent directors Gagan Singh, Ravindra Dhariwal and Jacob Mathew that it was willing to help the Indian firm through private equity firm Samara Capital, which has its backing.

It said that Samara Capital remains interested in buying out the debt-strapped retailer’s businesses for 70 billion rupees, and had asked Future Retail to provide its financial details to Samara Capital for the private equity fund to conduct due diligence.

Prior to that, Future Retail’s independent directors had asked Amazon if it was willing to give a long-term loan to avoid default on repayment of a 35 billion rupee (US$935.6 million) loan due on January 29. Amazon had replied that it was willing to assist Future Retail but the Indian retailer must shelve a 247 billion rupee deal offered by Reliance Retail.

Rejecting the Amazon offer, Future Retail said in a letter that the US firm was attempting to buy Future Retail’s assets “on the cheap.”

“Accordingly, we will not be assessing any proposals from you, until an actual solution which meets FRL’s capital requirements and addresses concerns of its stakeholders, in a legally-compliant manner, is tabled,” the letter said, according to press reports.

Amazon’s Jeff Bezos and Reliance’s Mukesh Ambani are going head to head for India’s retail segment. Image: Facebook

They also said the 70 billion rupee offer was “significantly below the amount needed to discharge Future Retail’s total liabilities.” The debt-ridden retailer’s liabilities and part of the committed vendors’ payments through March 2022 is 120 billion rupees.

The directors termed the comparison between Reliance’s offer and the proposed transaction with Samara Capital as “misplaced.”

The scheme of arrangement with Reliance Retail will be a court-approved transaction and has already received the approval of various regulators, including the Securities and Exchange Board of India and Competition Commission of India, and complies with Indian laws, they added.

The directors noted that they had accepted the Reliance transaction as it addresses the need to pay lenders and suppliers, protect the investment of shareholders and secure the jobs of over 25,000 employees.

A copy of the letter was sent to regulatory agencies and a clutch of lenders including the State Bank of India.

Future Retail and Amazon have been locked in a bitter legal tussle after the former agreed to Reliance Industries offer and decided to sell a major chunk of its assets.

The US e-commerce giant dragged Future Retail to arbitration at the Singapore International Arbitration Center in October 2020, arguing that the Indian retailer had violated its earlier contract by entering into a deal with Reliance Retail on a slump sale basis.

Amazon and Reliance Group are in direct competition for dominance of India’s retail market. Amazon has invested around $6.5 billion in India and sees it as a key growth market.

Amazon’s partnership with Future Retail and integration of the Indian retailer’s stores on its website had helped to boost its online grocery deliveries, giving it an incentive to keep Reliance Group away from its strategic partner.