In a further escalation of the raging feud between Amazon and Future Retail, Amazon has written to independent directors of Future Retail Ltd (FRL) alleging financial irregularities, including “material related party transactions” with various entities of the Future Group.
In the letter, also in copy to the Union Minister of Finance, Reserve Bank of India, Sebi, Indian Competition Commission, Enforcement Directorate, among others, Amazon alleged that ‘a simple reading of FRL’s publicly available financial statements reveals prima facie “harm may have been caused to its public shareholders, banks, creditors and third party suppliers.
Amazon alleged that Future Retail transferred Rs 7,000 crore to Future Enterprises Ltd (FEL) controlled by Kishore Biyani in FY20 as an advance of capital and payment for goods and services during FY20. Fiscal year 20. According to the letter, this included a capital advance of Rs 3,560 crore advanced by FRL to FEL and the purchase of large quantities of goods and services from FEL in the amount of Rs 3,472 crore.
“It is for the independent directors to consider whether such transactions entered into by FRL and FEL, including with related parties (directly or indirectly, or through a series of transactions), have been undertaken in the best interests of FRL, at arm’s length and were motivated by fiscal prudence, especially when FRL was allegedly facing financial difficulties at the time, ”the letter said.
The letter also alleged that members of Future Retail’s audit committee expressed concerns about FRL’s financial management, as well as a proposal for an independent third-party investigation to find the reasons for the increase in debt. the company.
“It appears that FRL has generated a cash buffer by delaying payments to third party creditors. This may have been done for the purpose of making payments to related parties in preference to reimbursement of amounts owed to third party creditors / sellers. party contributions appear to have been paid for 94% of purchases in FY20, while only 59% of other creditors’ contributions have been paid. This requires careful consideration, ”Amazon said in the letter.
Amazon added, “A review of FRL’s financial statements shows that funds raised in fiscal year 2019-2020 were primarily used for extraordinary cash outflows. This included payments for security deposits, advances to suppliers and the purchase of store infrastructure from related parties. “
Amazon also called for an investigation by statutory authorities, regulators or enforcement agencies “to investigate and investigate financial statements and records, including transactions and discussions with related parties on the board of administration, and audit committee meetings, in the interest of public shareholders, banks, creditors and third party suppliers. “
In response to Amazon’s letter, a spokesperson for Future Group said that Amazon was neither a shareholder nor a creditor of FRL and had no right to respond to the letter, and that all transactions between parties related were recorded and formed part of the public disclosures made by the company.
“Amazon’s letter is nothing but an afterthought and counterattack to India’s Competition Commission third party notice against Amazon over Future Coupons complaint Pvt Ltd. (FCPL) requesting the withdrawal of CCI’s approval for Amazon’s investment in FCPL.The allegations in Amazon’s letter are made in connection with a dispute that is being dealt with by the Supreme Court , the High Court and other regulatory bodies, ”the spokesperson said.
The spokesperson also added that the board of directors of Future Retail has formed a crisis management committee to deal with the situation resulting from the COVID lockdown, nationwide store closures and the sale of ‘promised actions impacting all aspects of the operation of the business and that various issues raised by the committee from time to time have been clarified by management with supporting documents and presentations to their satisfaction and through special audits, if applicable.
“All related party transactions and records of the use of funds are recorded and form part of public disclosures made by the company as part of standard governance practices. There is nothing new that is brought to light except for false speculations created from selective extracts from these documents. We must understand the motivation behind these allegations and the timing for them, rather than relying on these baseless and malicious allegations, ”added the spokesperson.
This escalation between companies over the Rs 24,713million deal between Future and Reliance Retail comes after independent directors of FRL sent two letters to the ICC alleging that Amazon had misled the ICC and that she never intended to invest in FCPL.
(Edited by : Jomy Jos Pullokaran)