After Reliance's takeover of Future's stores, miffed lenders may approach SEBI

 The Amazon-Future Retail saga is shaping to become one of the most high-profile corporate battles India has seen in over a decade. And India's markets regulator Securities and Exchange Board of India or SEBI may soon have an important decision to make.

Last week, Mukesh Ambani-led Reliance Industries Limited took over control of nearly 200 small-format retail stores of the debt-ridden Future Group and is further planning to acquire 200 more such stores across the country.
 
As a result of this takeover, at least 26 lenders of Future Group represented by the Bank of India may approach SEBI with their concerns about the move by RIL, multiple sources in the know have told Business Today.
 
“The current stealth takeover of Reliance over Future’s priced jewels [its retail stores] has raised concerns, prominent amongst which are the Rs 3,500 crore debt which Future Group owes to the banks and the conditional approval which the Future Group/Reliance got from SEBI subjected to the outcome of the ongoing legal proceedings. As a matter of fact, the case is still going on in Delhi High Court and, hence, the sudden takeover of the Future Group’s retail arm by Reliance may necessitate the action from SEBI,” a top source privy to the development told BT.
 
BT reviewed the documents in which the Kishore Biyani-led firm had agreed to the sale of its small-format stores to be overseen by the lenders in order to repay its Rs 3,500 crore debt the company owed to the banks.
 
As per the minutes of the meeting held on January 1 between the lenders and FRL, a copy of which was reviewed by BT, the banks had agreed to form an asset sale committee and public bidding was to take place with the floating of an expression of interest by the banks and completion of execution of sale with the finalisation of the successful bidder.

FRL had, in turn, agreed to get a 'No Objection Certificate' from Reliance since the firm had earlier entered into a proposed deal to take over the retail, wholesale, logistics and warehouse businesses from FRL.
 
The documents showed that Bank of India acted as the facility agent on behalf of lenders, which includes the likes of SBI, HDFC Bank, and Union Bank of India, among others.

Bank of India is yet to respond to our detailed queries over the issue.
 
As reported by Reuters, Reliance recently pressed ahead with a stealth takeover of FRL's highly prized retail stores after the latter failed to make lease payments for them to Reliance. American e-commerce behemoth Amazon has also been keen to take part-ownership of FRL's retail real estate.

Since 2020, Reliance and Future have been unable to close a $3.4 billion deal that entailed the takeover of the latter's retail assets by the former, since the deal has been successfully blocked by Amazon, citing violation of some agreements.

SEBI’s conditional approval
 
In January 2021, SEBI had given conditional approval to a Rs 24,713 crore deal between Reliance and FRL, albeit subject to the outcome of the arbitration and legal proceedings between Amazon and Future.
 
The regulator had said that Future Group has to specifically disclose the pending case in Delhi High Court and arbitration proceedings while seeking approval for the scheme of arrangement from shareholders or the National Company Law Tribunal or NCLT.
 
However, the deal, according to Future Group’s stock exchange filing, has not been implemented due to ongoing litigation initiated by Amazon in October 2020 which, as per FRL, has "created serious impediments in the implementation of the scheme resulting in the severe adverse impact on the working of the company.”
 
Amazon was able to secure in 2020 an arbitration award in the Singapore International Arbitration Centre (SIAC) in its favour which prohibited the Future Group from going ahead with the sale of its assets to Reliance, which the American e-commerce behemoth alleges to be in violation of an earlier shareholder agreement between Future Group and Amazon (in 2019) when the e-tailer invested $200 million in Future Coupons for a 49 per cent stake.
 
The e-commerce giant has been alleging that Future’s deal with Reliance is in violation of this agreement and that the Jeff Bezos-led firm had the first right of refusal over any sale of assets to a third party. It also invoked a particular clause under the agreement which had put Reliance in the restricted entities list with which the Future Group cannot enter into any agreement.
 
BT has sent queries to SEBI, Reliance, Future Group and Amazon. A Future Group spokesperson said that the company has already informed the stock exchanges about the recent acquisition and has nothing more to add to the statement.
 
Amazon and Reliance declined to comment on the queries whereas an official comment from SEBI is awaited.