Amazon and Future Retail have entered the final stage of talks to sign a deal in which the American e-commerce giant will buy up to 9.5 percent of the Kishore Biyani led firm, multiple sources close to the development told CNBC-TV18.
An agreement could be signed as early as December, said the sources, asking not to be named. Amazon is also exploring options to buy a larger stake in Future Retail at a later point, they said.
According to the sources, Amazon is negotiating the quantum of 'call premium' to be paid if 'call option' is included in agreement.
A call option is a financial contract allowing the buyer to purchase the underlying shares at an agreed price, while the call premium is the price set to be paid by the buyer to the seller to obtain call option.
The 'call premium' is likely to be 20-25 percent higher than the price determined by Sebi formula for preferential allotment. According to Sebi regulations, pricing for a preferential issue is determined by the average weekly high and low of closing prices of last 26 weeks or last 2 weeks preceding the relevant date.
If the right to exercise a call option is included in the agreement, the deal could be valued between Rs 3,200 and Rs 3,500 crore, said the sources, adding that the final stage of documentation is underway. However, after the deal is finalised, it will be subject to the Competition Commission of India (CCI) and the shareholders' approval.
In October, Amazon emerged as the front runner to buy a sub 10 percent stake in Future Retail. Tech giant Google, Alibaba backed Paytm had also expressed interest in buying stake in the company.
The funds from Amazon will give Future Retail ammunition to take on rivals in both, the physical and online world. The deal is likely to be done through Amazon's investment arm and the final agreement could also involve some exclusivity clauses.
Post the deal, Amazon is likely to set up a microsite specifically for Future Retail brands. The portfolio of private labels is likely to be on offer via Amazon. Meanwhile, Amazon experience zones could be set up at Future Retail outlets.
In a bid to strengthen its presence in the physical space and also to take on Walmart, Amazon has been on an acquisition spree in India. In 2017, Amazon bought 5 percent stake in Shoppers Stop for Rs 180 crore. Recently, Amazon along with private equity firm Samara Capital bought Aditya Birla Group's retail chain More.
When contacted Amazon refused to comment on the report, while Future Retail did not respond.