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Current Affairs

Reliance cancels Future Retail deal

Date: 26 April 2022 Tags: Miscellaneous

Issue

Reliance Industries has called off proposal to buy Future Retail’s assets. This was because secured creditors rejected the RIL plan.

 

Background

Selling of Future Retail Limited’s (FRL) assets to Reliance Retail Ventures Ltd (RRVL), a subsidiary of RIL, for Rs 24,713 crore was rejected by creditors.

 

Details

  • The shareholders and unsecured creditors of FRL were in favour of the deal but secured creditors were opposed to it.

  • Big Bazaar, Food Bazaar, FBB, HomeTown, Central and Brand Factory are the retail chains owned by Future Group.

 

Reasons for opposition

  • Banks were opposed to the deal as there was ambiguity about the recovery of debts after the deal went through.

  • The Future Group had claimed that over Rs 12,000 crore debts will be transferred to RIL after the deal. It was not able to convince the lenders.

  • Lenders are now planning to move the bankruptcy court for a resolution plan. A new mechanism has to be introduced to recover dues.

 

Amazon’s opposition

  • Reliance Retail has begun taking over some retail chains of Future Group, which was opposed by Amazon.  Lawsuits and arbitration were filed across India and Singapore.

  • Amazon had invested in Future Group’s promoter and the deal had given Amazon an opportunity to take over the Future Group’s business in future.

  • The selling of assets to rival Reliance Retail was against the interests of Amazon and it had filed various petitions to oppose the deal.

 

Condition of Future Retail

  • Future Retail is defaulting on repayment since last year. It also failed to infuse Rs 3,900 crore by way of equity in the company before the due date of March 31, 2022.

  • The company had to pay an aggregate amount of Rs 5,322.32 crore to various consortium banks and lenders as defined under one-time restructuring (OTR) plan.