Reliance Retail drops Future Group deal after secured lenders reject it

Kishore Biyani's retail chain was to sell 19 companies for Rs 24,713 crore as part of an agreement announcement in August 2020.

Reliance Retail said on Saturday it will not move on its plan to buy Future Group’s businesses after secured lenders to the Kishore Biyani-led company voted against the deal.

“As per these results, the shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented,” said Reliance in a stock exchange filing.

A majority of secured creditors voted on Friday against the resolution needed to approve Future Group’s Rs 24,713 crore scheme to sell most of its retail and logistical businesses to Reliance Retail.

As many as 82.75 per cent of Future Lifestyle secured creditors voted against the scheme. As many 81.91 per cent shareholders voted in favour, and so did 93.93 per cent of the unsecured creditors.

In Future Retail, 69.29 per cent of the secured creditors voted against the resolution, 85.94 per cent of the shareholders voted in favour of the scheme of amalgamation while 69.29 per cent of the secured creditors voted against the resolution, and 78.22 per cent of the Future Retail unsecured creditors voted in favour of the scheme.

In Future Supply Chains, 81.63 per cent of the secured creditors voted in favour of the scheme.

In Future Consumer, none of the secured creditors of the company voted in favour of the resolution, 99.86 per cent of the shareholders voted in favour of the scheme of amalgamation and 77.4 per cent of the Future Consumer unsecured creditors voted in favour of the scheme.

At Future Enterprises, 100 per cent of the shareholders voted in favour of the scheme. As many as 100 per cent of secured creditors voted against the scheme and 62.7 per cent of the unsecured creditors voted in favour.

Voting was conducted after an order by the National Company Law Tribunal (NCLT) on February 28 following a Supreme Court order, which allowed Future Group a meeting of shareholders and creditors to seek approval for sale to Reliance Retail for ~24,713 crore.

Shareholders, secured and unsecured creditors of the six listed Future Group companies voted over Tuesday and Wednesday. Bankers had earlier told 'Business Standard' that all the large lenders had rejected the proposal.

Public sector lender Bank of India (BoI) has taken Future Retail  to NCLT for initiating resolution proceedings under the Insolvency and Bankruptcy Code.

BoI, the lead bank in the consortium of lenders to Future Retail, has moved the NCLT in an attempt towards debt resolution. The exposure of the banks is estimated at around Rs 17,000 crore.

According to Future Retail’s filings on the exchanges, BoI served an advance intimation of filing an application under Section 7 of the IBC 2016 against the company. This is for non-payment 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 this.

Earlier Amazon had alleged these shareholders and other meetings were against their earlier deal with Future Group, which the latter said was in accordance with the NCLT order.

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

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