Reliance, Adani competing to acquire Future Retail: Journey so far
Kishore Biyani-led Future Retail Ltd. is caught in a mountain of debt. The once-successful retailer has now released a provisional list of applicants who are interested in acquiring the debt-ridden flagship company of Future Group. The list of buyers includes Mukesh Ambani's Reliance Retail and an Adani Group JV. With insolvency proceedings going on, let's take a look at Future Retail's journey so far.
Constant diversification, expansion led to Future Retail's fall
Future Retail was a prominent player in India's retail space with stores like Big Bazaar and Brand Factory, among others. The company's downfall is a story of over-diversification, never-ending restructuring, and, most importantly, piling debt. Continuous expansion and diversification landed Biyani in a debt trap. By the end of September 30, 2019, Future Group's listed entities owed Rs. 12,778 crore to lenders.
Amazon indirectly got stake in Future Retail
In 2019, Amazon entered the scene as Future Retail's savior. However, the retail giant was prohibited by India's foreign direct investment rules to directly rescue the debt-laden Future Retail. Instead, it funded Future Coupons, a promoter entity of Future Retail. Amazon bought a 49% stake in Future Coupons. Through this deal, the company indirectly got a 3.58% stake in Future Retail.
Future sold its business to Reliance
Amazon's deal with Future Group had a non-compete clause, which prevented Future Group from selling its assets to Amazon's rivals, including Reliance. However, Reliance was Future Group's favored savior, and in 2020, hit hard by the pandemic, the company decided to sell its retail, wholesale, and logistics business to Reliance. This triggered a legal battle involving Amazon, Future Group, and Reliance.
Legal battle dragged on for a while
Amazon approached Singapore International Arbitration Centre to stop the Future-Reliance deal. In an interim award, the arbitration tribunal suspended the deal. Against this, Future Retail moved the Delhi HC in November 2020. Thus began a to-and-fro legal battle. The deal received nods from Competition Commission of India (CCI) and Securities and Exchange Board of India (SEBI), but Amazon wasn't ready to let it happen.
Reliance assumed control of 835 Future Retail stores
While Future Retail moved courts to finalize its deal with Reliance Retail, the retail arm of the oil-to-telecom conglomerate assumed control of 835 stores of Future Retail. Reliance cited unpaid payments by Future for the takeover. The move surprised everyone, including Future Retail. The company's move gave new dimensions to the dispute, with many asking, "What will Amazon fight for now?
Future-Reliance deal fell through after secured creditors rejected it
The legal battle and support from shareholders did not help Future in securing the deal with Reliance. Moreover, 70% of the company's secured creditors voted against the deal. The company needed the support of 75% of secured creditors. This resulted in the deal falling through. This was followed by a plea from the Bank of India to initiate insolvency proceedings against Future Retail.
Several companies expressed interest in Future Retail
Future Retail is currently undergoing insolvency proceedings. One of the interested parties in acquiring the company is Reliance. Financial creditors have claimed Rs. 21,057 crore from Future Retail, while operational creditors have claimed another Rs. 265 crore. As many as 49 companies have submitted their expression of interest in Future Retail. Interestingly, this also includes Adani Group's JV April Moon Retail.
