SBI asks Future Retail for its opinion on the takeover of Reliance assets

The State Bank of India has asked Future Retail to report on the steps taken by the company to take over assets and inventory from Reliance Industries.

Reliance had taken over more than 900 of its 1,500 stores last month after Future Retail failed to pay the lease fee. Following this, Future Retail had written to Reliance Industries asking it to return the stores’ assets and inventory.

SBI and other Future Retail lenders claimed the first charge on the assets.

After stores were abruptly taken over in the last week of February, Future Retail said those stores contributed more than 50% of the company’s revenue. On the other hand, the lenders had also issued a public notice advising that they held a “security interest” over movable fixed assets and current assets (including receivables, inventories, spare parts, inventories, flows of cash) of the FRL.

Reliance defended its decision to take over the stores, saying in a recent letter that it had to guarantee the dues owed by Future Retail. Reliance said the lenders were secured creditors, and if they planned to take Future Retail to the NCLT or debt collection courts, then Reliance would have no chance of recovering its funds.

According to reports, Reliance provided financial support of ₹4,800 crore comprising ₹1,100 crore of unpaid rent and ₹3,700 crore of working capital.

In August 2020, Reliance had agreed to buy the assets of several Future Group companies. He had decided to buy the assets of the company’s logistics, retail and wholesale businesses owned by Kishore Biyani among others at a valuation of ₹24,713 crore.

However, Amazon, which had invested ₹1,400 crore in one of the Future Group companies in 2019, had opposed the deal. He had taken the Future Group companies to arbitration on the grounds that he had breached an agreement in which Reliance was a restricted party.

After the e-commerce giant won an interim ruling in its favor, it petitioned Indian courts for redress. This was opposed by Future Group. Since then, several court cases have been heard in different courts.

Litigation, according to Future Group which has been posting losses for at least five quarters now, has further eroded the company’s financial strength. The company has defaulted on payments to lenders and sellers, among others.

Published on

April 19, 2022

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