Future Retail to deny Amazon’s request; edtech companies consult ASCI
Also in this letter:
- Edtech companies work with ASCI on advertising rules
- View: Buffering, the market is reassessing startups
- An essential techade for Indian IT
Independent FRL administrators deny Amazon’s request
Kishore Biyani, future CEO of the group
The independent directors of Future Retail Ltd (FRL) have decided not to accept Amazon’s request to allow private equity fund Samara Capital to carry out an urgent due diligence of the cash-strapped retailer.
Catch up fast: In a letter to the independent directors on Saturday evening, Amazon said Samara Capital remained committed to the term sheet signed on June 15, 2020, which offered a “purchase consideration” of Rs 7,000 crore for FRL. But first, FRL should turn over details of its finances to Samara for due diligence, Amazon said.
Don’t buy it: Ravindra Dhariwal, one of FRL’s three independent directors, described Amazon’s offer as a “smokescreen” and said it was untenable.
“All due diligence has been done all the way – by Reliance Retail and by the banks as part of the OTR process. Their demand for due diligence is all smoke and mirrors,” Dhariwal told us. “Their intent is clear: they want to say in the media headlines that they can solve the problem and we don’t allow them.They want to go to court and claim they have a solution.But any close scrutiny of their offer will immediately tell you that ‘it’s untenable, unsustainable and won’t even solve the problem.
Next steps: The three independent directors were due to send a response to Amazon late Sunday evening. Gagan Singh and Jacob Mathew are the other two independent directors.
Meanwhile, Future Retail plans to go to the Supreme Court on Monday, seeking an extension for the Rs 3,500 crore it must repay to lenders by January 29.
If FRL fails to pay lenders Rs 3,494 crore by January 29, the lenders’ debt exposure of around Rs 10,000 crore will have to be classified as non-performing loans by the end of the month. A $14 million coupon on its $500 million bond is due today (January 24).
Amazon’s letter: In its letter to the independent directors, Amazon had requested immediate access to FRL’s key financial, operational and other data for Samara to conduct “expedited due diligence” before bailing out the company.
A person familiar with the thinking of independent directors said that when Reliance Retail was offering Rs 24,000 crore and the company owed the banks Rs 12,500 crore, how could they accept an offer of Rs 7,000 crore? “Banks have the first charge on assets. Will they allow this?
Amazon’s letter was a response to FRL’s independent trustees, who on Friday requested Rs 3,500 crore in long-term unsecured loans from the US company to prevent Future Retail’s debt from being classified as non-performing assets ( NPA) in case of non-refund. its lenders before January 29. They had asked Amazon to confirm by Monday whether it would be willing to provide the loan.
Edtech companies work with ASCI on advertising rules
India’s top edtech startups such as Byju’s, Unacademy and upGrad, which had recently formed a consortium for self-regulation, are now consulting the Advertising Standards Council of India to address one of the most critical concerns of edtech companies. edtech: their communication.
Indian consortium Edtech, whose formation was first reported by ET, has had several conversations with ASCI to finalize its marketing and advertising code, people familiar with the matter said.
Why is this important: At a recent meeting, Ministry of Education officials told the consortium that it should implement the proposed self-regulatory codes in the spirit and should not allow advertisements that, for example, guarantee a particular job or outcome. We reported earlier this month that edtech companies were primarily focused on two core issues: no misleading ads and opaque payment structures.
The government reportedly told the consortium that the move to form a self-regulatory code was welcome, and as long as it was honestly adhered to, the government would opt for light regulation.
Why now? Edtech companies realize that they are likely to come under closer scrutiny in the future as more people sign up for their services and investors continue to inject huge amounts of money into them. money as a result of the pandemic.
“Government officials are closely monitoring payment and advertising issues related to edtech as they have received complaints from various sections of society. In all likelihood, this would resemble e-commerce, where policy and regulation now play a vital role in India,” the sources said.
Edtech startups raised more than $4 billion in 2021 and $2.1 billion in 2020. They raised just $393 million in 2019 and $675 million in 2018, according to data from Venture Intelligence.
In the spotlight: We reported earlier this month on growing concerns about the business practices of edtech companies. In December 2021, Lok Sabha member Karti Chidambaram told parliament that there was a need to regulate the sector. Soon after, the government also spoke of the need to regulate the sector. Education Minister Dharmendra Pradhan said inter-ministerial talks were underway to come up with rules for the sector.
Tweet of the day
Closed deals ETtech
■ The Good Glamm Group acquired a majority stake in Organic Harvest, a brand of organic beauty and personal care products, for an estimated business valuation of $275-280 million. This is the seventh acquisition by the D2C company in the last 12 months.
■ StanMore, an online ambulance aggregator, raised $20 million in debt and equity from Healthquad, Kalaari Capital and others to expand operations to 500 hospitals and launch its Red Ambulance service in 10 more cities.
View: Buffering, the market is reassessing startups
US investors last week abruptly canceled bets on pandemic stock darlings like Netflix and Peloton after the former revealed new subscribers to the streaming platform were expected to arrive and the latter said it was cutting costs as demand for his exercycles slowed.
The pandemic trade came with a sell-by date. Still, the hard landing comes as a surprise as some estimates say 40% of US office workers are still working from home and the Omicron wave could delay their return.
As dollars swirl out of the pandemic game and into battered sectors like energy, which fuels inflationary concerns in the United States, Dalal Street has caught some of the jitters.
Companies that operate Zomato, Paytm and PolicyBazaar have seen their market capitalizations fall precipitously after highly valued IPOs less than a year ago. The market is repricing startups that have pursued customers at the expense of profit as a benign interest rate cycle nears an inflection point. (Read more)
An essential techade for Indian IT
Just over half of the world’s top 2,000 companies are engaged in digital transformation, giving Indian IT service providers ample opportunity to tap into this pool and beyond.
In pole position: Even before the pandemic hit, Indian IT firms accounted for over 60% of new IT deals. Since then, the scale of demand for online solutions for offline processes has allowed these companies to swing the big leagues.
Already, TCS, Infosys, Wipro, HCL Technologies and Tech Mahindra are expected to report $70 billion in combined revenue in the current fiscal year, each expected to grow 15-20%. The story with respect to their smaller peers is similar – in fact, they may even exceed the growth rates of their larger peers.
What sets them apart: Their business model, perfected over the past 40 years.
- Having a small group of experienced associates and hiring and training newbies has helped Indian IT companies create the ability to capture demand profitably even when talent is scarce.
So the question is, can Indian IT companies seize the opportunity despite headwinds, primarily a talent shortage never seen before in the industry? Read here to find out.
Other Top Stories by our journalists
Old and young seek young and new: Traditional business developers, as well as large conglomerates, are taking stakes in startups that are synergistic with or adjacent to their core competencies. Many have even launched funds to invest in such ventures. The trend has increased since 2019. (read more)
The demand for women in STEM jobs is increasing: According to exclusive data from JobsForHer, an online career platform for women, almost 50% of the total number of jobs currently posted on the platform are for women in STEM positions, an increase from 35% in 2019 before. the pandemic. (find out more)
Global Choices We Read
■ Why NFTs look more like collectibles than works of art (Bloomberg)
■ Can works like “Don’t Look Up” make us lose our minds? (NYT)
■ Digital cash is under scrutiny from the Fed (The Verge)
Today’s ETtech Morning Dispatch was hosted by Zaheer Merchant in Mumbai.