To stay in line with FDI law, Amazon seeks CCI approval for $200 Mn Future Coupons deal

Big corporations have been feeling the regulatory heat in India, with multi-million dollar transactions and acquisitions under government’s scrutiny. 

Recently, Hyundai-Kia’s  $300 million investment plan in ride-hailing juggernaut Ola was flagged by Competition Commission of India(CCI), questioning the nature of the deal.

It seems like Amazon India has taken a cue and is walking on eggshells regarding its proposed Rs 1,500 crore deal with Future Retail. The online retail giant has sought pre-emptive approval from the antitrust watchdog CCI to acquire 49% stake in of Future Coupons Ltd(FCL) as per an ET report. 

The move comes after the Indian government restructured the norms for Foreign Direct Investment(FDI) recently and the Seattle based company wants to ensure that the deal goes through without any roadblocks.

The revised policy issued last December allowed 100% FDI in only the marketplace based model of e-commerce through the automatic route, but with added restrictions. 

As per the new regulations which came into effect from February 1, any online marketplace cannot have an equity stake more than 25% in a vendor/seller. It is also restricted from controlling the vendor's inventory, or the vendor will not be permitted to sell its products on the marketplace.

Since Future Retail sells several of its branded product on Amazon’s online marketplace, the Amazon’s shareholding in FCL will be structured to ensure that the former takes up less than 25% equity shares with voting rights. 

The acquisition will be executed through Amazon’s investment arm registered in Nevada, Amazon.com Nv Investment Holdings LLC. The Jeff Bezos led company will be acquiring both voting and non-voting shares in Future coupons Limited(FCL), as per BSE filings. 

Publicly listed Future Retail can’t directly sell the stake to Amazon, so it is routing it through its holding group's FCL, which holds around 39.6 million share warrants. When converted, the share warrants will amount to approximately 7.5% stake in the Future Retail.

As part of the agreement, Amazon has been granted a call option also, which will allow it to acquire all or portion of the Promoters’ shareholding in Future Retail Ltd. The call option will be exercisable between the 3rd to 10th years, in certain circumstances revealed the filings.