Reliance calls off Rs 24,713 Cr deal with Future after secured creditors give a thumbs down

Almost 21 months after signing an agreement for a Rs 24,713-crore deal with Kishore Biyani-led Future Group to acquire its retail, wholesale, logistics and warehousing assets, Reliance Industries Ltd on Saturday said the transaction cannot go ahead as secured creditors of the latter have voted against it.

In a regulatory filing, Reliance said Future Group companies comprising Future Retail Limited (FRL) and other listed companies involved in the scheme have intimated the results of the voting on the scheme of arrangement by their shareholders and creditors at their respective meetings.

"... The secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented," said RIL, while updating on the scheme of arrangement for the transfer of retail and wholesale business and the logistics and warehousing business of Future Group to its subsidiary Reliance Retail Ventures Ltd (RRVL) and Reliance Retail and Fashion Lifestyle Ltd (RRFLL).

The Future Group companies had called meetings of their shareholders, secured and unsecured creditors this week to get the approval of the scheme of amalgamation and sale of assets as per the deal announced with Reliance Retail.

However, secured creditors, which mainly include banks and financial institutions, of listed entities - Future Retail, Future Enterprises, Future Lifestyle Fashion Ltd, Future Market Networks and Future Consumer -- could not get the mandatory 75 percent approval.

Though, the shareholders of the listed entities had supported the deal with Reliance.

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The meetings were opposed by ecommerce giant Amazon, which in 2019, had picked up a 49 percent stake in Future Coupons Pvt Ltd (FCPL), a promoter firm of FRL.

In August 2020, Future Group announced the Rs 24,713-crore deal to sell 19 companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd (RRVL).

RRVL is the holding company of all the retail companies under the RIL Group.

The deal was vehemently opposed by global ecommerce major Amazon, on grounds that the deal violated its 2019 agreement through which it acquired a 49 percent stake in FCPL, the promoter entity of FRL, for about Rs 1,500 crore.

There were no immediate comments, over the development, from Future Group, Reliance Retail and ecommerce major Amazon, which is opposing the deal.

In February, Reliance Retail had taken over the operations of at least 350 stores of FRL and offered jobs to its employees after the Kishore Biyani-led group failed to make lease payments to landlords.

Amazon had dragged FRL and promoters to the Singapore International Arbitration Center (SIAC), where an interim award was passed by the EA (the emergency arbitrator) in October 2020, in favour of Amazon. It had barred FRL from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.

Following this, a string of litigations started before the Delhi High Court, Supreme Court and NCLT.

This had forced RRVL to extend the long-stop date for the Scheme three times. Last month, it extended the date for another six months to September 30, 2022.

As per the scheme between Future Group and Reliance Retail, 19 companies of the former were proposed to be consolidated into one entity -- Future Enterprises Ltd (FEL)-- and then transferred to RRVL under the proposed deal.

However, as per the voting results updated by FEL on Friday, 99.97 percent of its secured creditors have opposed the scheme.

Though its 99.99 percent shareholders had supported the deal, its 62.65 percent of unsecured creditors had voted in favour of the scheme and the rest 37.34 percent of the total number of votes cast were against it.

Except for Future Supply Chain Solutions Ltd, all listed Future group entities including - Future Retail, Future Lifestyle Fashion Ltd, Future Market Networks and Future Consumer failed to get the mandatory 75 percent voting in favour of the scheme.

In two companies - Future Consumer and Future Market Networks, 100 percent of secured creditors have voted against the deal.

FRL, the flagship firm of Future group, in regulatory filing on Friday said 69.29 percent of secured creditors voted against the deal while 30.71 percent voted in favour of it.

Around 85.94 percent shareholders of FRL voted in favour of the deal with Reliance, while 14.06 percent shareholders opposed it.

Section 230 (6) of the Companies Act, 2013 mandates in the meeting of creditors or members (shareholders), the scheme of arrangement as sanctioned by the National Company Law Tribunal (NCLT), should be approved by the "majority of persons representing three-fourths in value".

Besides, the fate of FRL board and management is uncertain as the company also faces a plea to initiate insolvency proceedings before the NCLT.

Last week, public sector lender Bank of India moved the Mumbai bench of NCLT seeking insolvency proceedings and to declare a moratorium over the assets.