reliance retail: Future’s lenders reject $3.4 bn sale deal with Reliance Retail

Future Group’s proposed deal to sell its assets to Reliance Retail has fallen through after the majority of the lenders of the flagship Future Retail Ltd (FRL) has voted against such a takeover by Reliance.

In a regulatory filing to the stock exchange FRL said on Friday that 69% of the lenders have voted against while 30% have voted in favour of the scheme to sell the company’s assets to Reliance.

The creditors voted on Thursday in a National Company Law Tribunal (NCLT) mandated process to seek shareholders’ and creditors’ approval for a deal that has been lingering for 20-months amid opposition from Amazon. The struck down of the Reliance transaction by the creditors has now make it imminent for Future Group to go into bankruptcy, experts said.

The online-conducted shareholders meetings of six Future Group’s listed entities including Future Retail, Future Lifestyle Fashion (FLF), Future Enterprises, Future Consumer, Future Market Networks and Future Supply Chain Solutions and their voting took place on Wednesday.

On Thursday, the secured and unsecured creditors of those six firms voted in the final leg of a voting process to consider a scheme of arrangements.

State Bank of India, Bank of India, Bank of Baroda, HDFC Bank among two-dozen lenders have already classified FRL’s outstanding debt as non-performing assets (NPA).

In 2020, Future Group was forced to combine its two-dozen listed and unlisted companies and sell them on a slump sale basis to rival Reliance Retail for Rs 25,000 after the Kishore Biyani-founded retail group’s already precarious debt situation was exasperated by Covid-led lockdowns in early 2020 with debts topping Rs 12,000 crore. At present, flagship FRL itself is saddled with Rs 17,000 crore of debt from a consortium of 29 lenders. The group’s overall debt is around Rs 30,000 crore.

Months after Future announced its plans to sell assets to Reliance, Amazon mounted a legal challenge – dragging the sell-off for 20 months in various courts including the Supreme Court, Delhi High Court and tribunals including the NCLT and the Singapore International Arbitration Centre.

The Amazon-Future dispute stems from a 2019 investment by the US giant to acquire a 49% stake in promoter firm Future Coupons Pvt Ltd (FCPL), that owned about 10% of the flagship FRL.

The US e-commerce titan has accused Future Group of breach of contract by agreeing to sell its assets to Reliance, a “restricted” organization with whom FRL is barred from selling assets to as per its 2019 investment agreements.

Future Group is currently left with around 620 outlets after Reliance in February took possession of 835 of Future Group stores as the outstanding rentals against the beleaguered retailer accumulated to about Rs 4,800 crore.

Now the lenders and other creditors would have to fight it out in the insolvency court for Future Group’s remaining assets including a total of 620 stores – including 30 hypermarkets of Big Bazaars and 350 smaller format outlets – to recover their dues of more than 17,000 crores. Future Group’s mortgaged items to banks such as items in stores such as merchandize, racks, refrigerators, check-out counters, escalators among a legion of other assets are estimated to worth anywhere between Rs 3,000-4,000 crore.