Amazon.com, the parent company of Amazon India, has written to the Interim Resolution Professional of the debt-strapped Future Retail, flagging probable financial irregularities, and undervalued transactions at the Kishore Biyani-backed retail company.
Earlier this year, Future Retail was dragged into insolvency over unpaid dues. This comes after its ₹24,713 crore deal with Mukesh Ambani-owned Reliance Industries was rejected by its stakeholders. Amazon, which had invested in a sister concern of Future Retail in 2019, too, had locked horns with Future Retail over the said deal, and had dragged the company into mult-judiciary litigations.
In light of the ongoing arbitration at Singaproe International Arbitration Centre (SIAC, Amazon has written a letter to Vijaykumar V Iyer, Interim Resolution Professional of Future Retail appointed by NCLT’s Mumbai bench.
Flags discrepancies
In a 17-page letter, Amazon points at probable financial irregularities and undervalued transactions at Future Retail, as per publicly available information with respect to related party transactions. It has also flagged transactions that have resulted in significant divestiture of FRL’s assets without consideration, and consequential stripping of value at FRL.
“This letter is issued with a bona fide intent to protect value at FRL, and is without prejudice to the rights asserted and claimed, and submissions and contentions advanced in respect of the ongoing arbitration and other proceedings against FRL,” it pointed out.
‘Mandated by law’
Amazon said that it has written multiple letters to several authorities flagging potential irregularities, and as an IRP, it was incumbent on him, to protect and preserve the value of assets of FRL and “clawback value which has been removed unlawfully from FRL by suspicious transactions,” hence, Iyer was mandated by law to investigate the matter.
It claimed that on a prima facie basis, Future Retail had caused prejudice to all the stakeholders of the company while presenting the annual result for FY21. It said that the auditors had flagged concerns over the sudden spike in the debt, and it wasn’t satisfied by responses given at that time.
Amazon further alleged that Future Retail often entered into ‘Significant Related Part Transactions’ of various Future Group entities.
It also pointed out that Future Retail raised funds in FY20, therefore increasing its cashflows. However, “A review of the financial statements of FRL demonstrates that the funds raised in FY 2019-2020 were used chiefly towards extraordinary outflows. This included payments towards security deposits, advances to suppliers and purchase of store infrastructure from related parties.” Though most of these payments were towards deposits, advances paid to suppliers and capex purchased from FEL, all of the said amounts were higher than the previous fiscals.
‘Need verification’
“It needs to be verified whether these suppliers are related parties and if any extraordinary preference and treatment has been given to such related parties resulting in diversion of funds, which otherwise would have been available to FRL in the ordinary course to ensure business continuity,” Amazon said in its letter dated October 18, which was reviewed by businessline.
Along with potential financial irregularities, Amazon said that a thorough investigation was required for the divestment of the company assets including stores.
Earlier too, when Iyer was the Resolution Professional for Binani Cements, he had filed an application in the NCLT alleging fraudulent transactions involving promoters of the company. When businessline reached out to Iyer, seeking a comment on whether he would investigate the matter and flag irregualtires to the court, he didn’t respond to the said questions.