Future Group lenders reject slump sale proposal to Reliance Retail

Cite 'uncertainty over the entire proposition' for rejecting the proposal

Lenders have rejected the slump sale proposal of Kishore Biyani’s Future Group to Reliance Retail Ventures (RRVL), multiple sources confirmed to Business Standard after the e-voting was conducted on Thursday.

Bankers cited “uncertainty over the entire proposition” for rejecting the proposal.

The voting was conducted in accordance with an order of the National Company Law Tribunal (NCLT) issued on February 28 after the Supreme Court allowed Future Group companies to convene a meeting of shareholders and secured and unsecured creditors to seek their approval for the Rs 24,713-crore deal with RRVL.

Shareholders of the six listed Future Group companies submitted their votes on Wednesday. Bankers said all large lenders have rejected the proposal.

“There is no certainty of the plan (sale to Reliance). There is already a dispute,” said a senior official from a large public sector bank, indicating Amazon’s arbitration plea at the Singapore International Arbitration Centre in October 2020.

The US e-commerce giant took Future Group into arbitration, following alleged violation of contract by the former.

“Have they taken us into confidence before confiscating the stores? Why will lenders cooperate then,” asked the banker quoted earlier.

“We don’t see the proposal as viable,” said an official from another large lender, while confirming all the large lenders have voted against the proposal.

Sources said there is no clarity from Reliance Group on its intention to go ahead with the scheme of arrangement with Future Group as they have not communicated anything to bankers yet.

Two senior bankers said lenders, including State Bank of India and Union Bank of India, were seeking clarity on the scheme which did not come and have voted against the amalgamation proposal.

It is public money at stake and the prime task is to recover dues, they said.

Banks would prefer a resolution through the NCLT-led bankruptcy process, they added.

An email sent to Future Group did not elicit any response.

According to Future Retail’s (FRL’s) filings on the exchanges last week, Bank of India has served an advance intimation of filing an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the company. This is for default on non-payment of monies due in terms of the framework agreement entered into between the two parties.

“We have received a copy of the petition and are in the process of taking legal advice,” FRL said in its exchange filing. The application is expected to come up before the Mumbai Bench of the NCLT. No date has been notified for the same.

As part of the Rs 24,713-crore deal announced by Future Group in August 2020, FRL is to sell 19 companies operating in retail, wholesale, logistics, and warehousing segments to RRVL.

In February, Reliance Group began the takeover of 947 Future Group stores.

A source earlier said that Future Retail had not paid lease rentals to Reliance Industries (RIL) and added that the latter extended working capital support due to which FRL has been able to pay statutory dues, interest, one-time settlement to banks, and continue its business operations.

The source had also said that FRL owes RIL towards this working capital support.

RIL took possession of those stores – all were loss-making — that were sub-leased to FRL. However, this may impact the deal value negatively, said bankers.

Future Group has approximately 1,500 stores, of which 947 are in RIL’s possession.

 Another source had earlier explained that while RIL took over the stores, it also ended up taking over a lot of physical assets, such as escalators and chillers. Future Group had purchased a bulk of its fast-moving consumer goods and food stocks from JioMart and was making payments in a staggered manner, a chunk of fashion and general merchandise stocks belonged to Future Group.

The source had also then said that RIL’s actions preserve the value of FRL and will allow the scheme it signed with Future Group to sell its retail, logistics, and warehousing businesses to Reliance Group for almost Rs 25,000 crore in 2020 to continue.

In a stock exchange filing in March, FRL said it was committed to taking all actions necessary to seek value adjustments and reversal of takeover of stores by Reliance Group.

FRL also said its board had held two meetings and notified Reliance that such a “drastic and unilateral action” had not only come as a “surprise” to FRL, but also complicated the positive scenario, which had started building up after the Competition Commission of India’s order in December in its favour.

 WITH INPUTS FROM ABHIJIT LELE