State Bank of India seeks accountability on Future Retail store takeovers

Lenders have charge of inventory, exec says on RIL taking possession of some stores

The State Bank of India (SBI), which is among the key lenders of Future Retail (FRL), has asked the latter for accountability on the issue of Reliance taking over around 800 stores without any prior intimation to the creditors.

Lenders, including SBI, held a preliminary meeting and have objected to Reliance taking over the stores. FRL has to be held accountable for this, senior bankers said. They knew about it but did not provide any clear answers, the executives said.

Lenders have charge of stocks at the stores, said an executive of SBI. Lenders face many challenges, including making huge provisions for bad loans, the executive added.

A resolution plan for FRL has been submitted, under which creditors were not paid 100 per cent of their dues, but there was an arrangement for payment of dues to bondholders. Another meeting of the lenders is expected to take place.

Before SBI, another public sector, Bank of India (BoI), had issued notice in March asserting the lenders’ rights over FRL’s inventory. It said FRL had borrowed money, secured by providing charge over movable assets and current assets, including receivables, spares, inventories and cash flows, BoI had said on behalf of the lenders.

On February 25, Reliance Retail started taking control of stores that it had subleased to the Future group, which said it received termination notices for a significant number of stores due to huge outstanding. FRL had asked the Reliance group to reconsider all actions including taking over stores.

Action and reaction

• 70% stores in Reliance’s control have been taken over without lenders’ knowledge, banks allege
• Stakeholders’ meeting for approval of Reliance-Future transaction to be held this week
• Amazon contesting Reliance deal; matter before SC, Delhi HC, SIAC  
• Banks have moved NCLT for resolution under bankruptcy law

As part of the Rs 24,713 crore deal announced by the Future Group in August 2020, FRL was to sell 19 companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures (RRVL).

As for the distribution of proceeds from the Reliance-FRL deal, bank executives said Reliance had not shared any details and there was no clarity on what it was going to do.  The FRL case is now before the National Company Law Tribunal. Lenders will see if any other company comes forward.

Last week, BoI took Kishore Biyani-led Future Retail to NCLT for initiating resolution proceedings under the Insolvency and Bankruptcy Code. The total exposure of banks is estimated at around Rs 17,000 crore. It is already being treated as a non-performing asset (NPA) and banks have begun making provisions.

Future Group companies will hold meetings of their respective shareholders and creditors between Wednesday and Saturday to seek their approval for the Rs 24,713-crore deal, which has been contested by Amazon and is under litigation at various forums, including the Supreme Court, the Delhi High Court, and Singapore International Arbitration Centre.

FRL and group entities were hit badly by economic disruption caused by Covid-19 pandemic. The loans of FRL and some entities were restructured under a regulatory package hammered out in 2020 for affected enterprises., exec says on RIL taking possession of some stores.