Private equity firm Blackstone seeks clarity on Reliance-Future deal

Fate of PE firm's Rs 1,750-crore investment remains uncertain

Global financial powerhouse Blackstone Group has sought clarity from the Future Group on the fate of its Rs 1,750-crore investment in Future Lifestyle Fashions and its holding company, Ryka Commercial Ventures (RCVPL), last year. 

The US-based private equity firm pumped in Rs 545 crore for picking 6 per cent stake in Future Lifestyle Fashions in July 2019, and spent Rs 1,205 crore in the debt instruments issued by RCVPL.

The Future Group has appointed JM Financial to talk to all its investors, including Blackstone, and make them believe that its transaction with Reliance Retail is in the best interests of all stakeholders. 

In August, the Future Group had announced a lifeline transaction with Reliance Retail, under which it agreed to transfer all its assets to the latter. According to the plan, all Future Group listed entities would be merged into Future Enterprises. Once the merger is over, the entire retail business, including wholesale and logistics, were to be hived off and sold to Reliance Industries (RIL) for Rs 24,700 crore. The shareholders of all the listed companies were to be issued shares in the new merged entity.

Blackstone spokesperson declined to comment, but insiders said the firm was not happy that its investment is set to see a significant erosion in such less time.

The objection from Blackstone comes within days of global retail giant Amazon objecting to the deal, as the fate of its investment in Future Coupons — the holding company of Future Retail — is also uncertain and will see a huge erosion. According to some reports, Amazon has already approached the Singapore International Arbitration Centre over the issue.

Bankers said Blackstone was in the same boat as Amazon and followed the same model of investing in the holding companies of Kishore Biyani, which in turn, held stake in listed entities. 

The funds raised from both companies were used by Biyani to pay part of group loans to other lenders. 

“Blackstone is not only sitting on a huge mark-to-market loss on its Future Lifestyle Fashions investment, it may also have to take a huge haircut on its debt instruments,” a banker said, asking not to be identified. 

“They (the foreign investors) should question the due diligence done by them before investing in Future. If Future Group companies are now referred to the National Company Law Tribunal, these investors will not get any returns and will have to wait for years in litigation,” the banker said. 

The RIL deal is a win-win deal for all and Indian lenders are supporting it. The Future Group has blamed the slowing economy and the pandemic, which resulted in the company’s stores being shuttered across India. The group, which runs several formats of organised retail chains including Big Bazaar, Nilgiris, and Food Bazaar, had to dial RIL for a rescue deal after it started defaulting on loans since March.

According to the plan, various Future Group companies such as Future Retail, Future Consumer, Future Supply Chain Solutions, Future Lifestyle Fashions, and Future Market Networks will first merge into Future Enterprises. After the transaction with RIL, Future Enterp­rises will retain few manufacturing and distribution of FMCG goods apart from its insurance joint ventures with Generali and ventures with NTC Mills. 

(With inputs from Raghavendra Kamath)