The two-year arrangement between Reliance Group and Future Group, which involves the acquisition of retail, wholesale, logistics, and warehousing assets, is about to come to an end.
RIL (Reliance Industries Limited) on Saturday said the asset acquisition of the future group cannot go ahead as the secured creditors of the Future group have voted against it. To understand exactly what happened we need to have look at the differences.
The main difference between secured and unsecured creditors is the order in which they receive money and the kind of security they hold over the company. If we look at the payment hierarchy then secured creditors come first followed by unsecured creditors.
How many Secured creditors rejected the move?
According to the research on exchange filling, in the secured creditor’s e-voting, 69.29% of the votes from 11 lenders were against the proposal to sell the assets of Future group to RIL industries. However, out of 34 lenders, 30.71% of the votes were in favor of the asset acquisition.
The future group in a regulatory update mentioned, that 78.22% of unsecured creditors voted in favor of the proposal. Among the shareholders of Future Retail Limited, 85.94% voted in favor of the deal while 14.06% voted against it.
Apart from this, the deal will only get through if 75% approval is received from the secured creditors which didn’t happen. A lot of leading banks have invested in Future group who were not in favor of the proposal stating there’s ambiguity on debt recovery.
Banks are now expected to move to the bankruptcy court for a resolution plan. Meanwhile, Future Group came up with a proposal to transfer a debt of over 12,000 crores to RIL. Banks are also not convinced by this proposal and as they’re the secured creditors this is another reason why the takeover fell off.
Since February, Reliance began taking over the rental leases of around 800 stores out of 1400 stores which once was run by Future Retail, Future Fashion, and Life Style Limited. This move was made by Reliance amid the lawsuits and arbitration across India and Singapore.
Banks in the form of secured creditors have already questioned the takeover of some Future stores. Secured creditors released a statement stating,
“Anybody dealing with company’s assets should keep in mind that these are subject at all times to the charge of the lenders”
Are secure creditors the only ones to oppose this deal? The answer is No because US online retail giant Amazon has opposed the Future Retail deal with RIL. Amazon stated, that the present meetings taking place are illegal and such a step would breach the 2019 agreement when RIL made investments in Future Retails promoter firm.
Amazon further stated this also violates a Singapore arbitral tribunal’s injunction on the sale of retail assets to Reliance. Future Retail had rejected Amazon’s allegation and said the meetings held on 28th February 22 are in compliance with the directions issued by the NCLT to consider and approve the scheme of arrangement filed by various entities which are part of the deal.
For the last two years, India has witnessed a high-pitch battle between the world’s two richest business tycoons. This battle is focused on capturing India’s $900 billion retail markets (Expected to be 1.3 trillion by 2024)
Is this a setback for Future Group?
Since last year Future Group has been defaulting on repayment. The company still owns around 20,000On April 1st Future Retail failed to infuse 3,900 crores by way of equity in the company before the deadline which was on 31st March, 22.
Further considering the infusion of capital there was an obligation of the company to pay an aggregate amount of 2,322.32 crores to various consortium banks and lenders before March 31st.The fall of the deal also has affected Future Groups’ share price which has seen a sharp 20% crash in stocks.
Once comfortably oscillating between 50-60 is now at 29.40 INR before the closing of the market. Presently, Future Supply chain stocks are priced at 37.30 and future Lifestyle Fashion stock is at 29.40.The prices of these stocks are at their all-time low and are expected to fall sharply with the opening of the market.
Published By – Supreeti Ghosh
