E-commerce major Amazon is considering investing further in Future Retail Ltd. as the debt-ridden retail firm is battling a cash crunch, confirmed the people in know of the matter.
Amazon holds an indirect stake of 1.3 per cent in Future Retail and is in discussion with its parent company Future Group over the stock purchase.
The online retail giant is planning to raise its holdings in Future Retail to as much as 49 per cent, sources said.
Since the purchase of more than 25 per cent shares could trigger an open offer under stock exchange rules, Amazon might line up local investors to join the deal.
Foreign ownership in the multi-brand retail trading industry in India – including department stores and supermarkets – is capped at 51 per cent.
High debt levels at the holding company level and the blow to its sales due to the coronavirus pandemic have prompted the Future Retail shares to plunge and this further has forced Future Group to explore possibilities which included a significant stake dilution in Future Retail and even a merger of insurance joint venture Future Generali with bigger firms.
Future Retail has already used about half of an emergency credit facility for working capital. According to sources, lenders allowed the firm to draw down Rs. 3 billion (US $ 40 million) of the Rs. 6.5 billion credit line.
Shares of Future Retail fell 4.9 per cent in Mumbai and the company has a market value of around Rs. 39 billion.
