Why has SEBI ordered a forensic audit into Future Retail Ltd?
Answer
Answer
SEBI appointed Chokshi and Chokshi as the forensic auditors to conduct a special forensic audit Future Retail Ltd (FRL) for the last three fiscal years from FY19 to FY22. This would include the forensic audit of the books of Future Group in general and Future Retail in particular. The other 4 companies to which the SEBI notices have gone out are Future Enterprises, Future Consumer, Future Lifestyle and Future Supply Chain Solutions. Forensic audit is ordered when there are suspicions of siphoning of funds in bulk.
It clearly means that the SEBI has reasons to believe that the company in question has undertaken business transactions not in the interests of the investors. This can also be transactions that negatively impact the market integrity. This will include an elaborate and incisive review of last 3 fiscal years between FY2020 and FY2022. The audits focus in this case would be pertaining to related-party transactions with Future Retail Ltd during the review period. This request for forensic audit was first made by Amazon.
A quick background first. In August 2021, Future Retail and Reliance Retail had signed an agreement to sell Future group assets to RRVL for Rs24,713 crore. Due to a series of court cases and endless battles, RRVL took possession of most of the retail outlets of Future Retail against rental dues outstanding. This has almost brought an end to the Future story as any recovery proceedings from these levels are more of a theoretical nature. The problem dates back to Amazon investing Rs1,400 crore in Future Coupons in the year 2019.
To prevent the deal between Future group and Reliance, Amazon had then dragged the Future Group to the Singapore International Arbitration Centre or SIAC. The SIAC had even ruled in favour of the Amazon group. In addition, Amazon had tried to move Indian courts to seek enforcement of the award passed by the SIAC. However, in all this chaos, there have been strong allegations by Amazon that the entire act by Future group was staged to give them enough time to siphon out the funds. That will come out in the forensic audit.