The bankers of flagship Future Retail Limited (FRL) are left holding Kishore Biyani's personal guarantee, as well as his elder brother Vijay Biyani and cousin Rakesh Biyani, which is difficult to execute. In addition, the Future Enterprises' corporate guarantee of Rs 5,700 crore is meaningless because the company is already a defaulter in the market.
The state-owned Bank of India, the leading lender to FRL, has already approached the National Company Law Tribunal (NCLT) for a resolution under the Insolvency and Bankruptcy Code (IBC).
Bankers are in a fix as most of the Future Group's retail stores are gone. Reliance Retail has recently pounced upon the lucrative 947 stores after the lease agreement with Future Group ended. The remaining assets are deteriorating because of insufficient funds as well as inventory.
Sources suggest that not all loans are backed by personal and corporate guarantees. There are some banks that insisted on personal guarantees from promoters or corporate guarantee when the restructuring of loans was undertaken post the Covid outbreak. As per the agreement, the maximum corporate guarantee was restricted to Rs 5,700 crore.
FRL is into the manufacturing and sourcing of fashion products and renting of retail infrastructure. The company had posted a turnover of Rs 3,719 crore for the nine months ended December 31, 2019 when the deal with Reliance was signed. The company's turnover has, however, crashed to Rs 886 crore, with losses of Rs 1,049 crore in 2020-21. The company's market valuation is paltry at Rs 279 crore.
The stage is now set for creditors, including banks, to invoke IBC proceedings against the Kishore Biyani group of companies, which owe Rs 24,000 crore-plus to the banking system. The Group companies are now staring at multiple law suits under the IBC post the Reliance Group's calling off the Rs 24,731 crore retail deal.
The group companies' positions have weakened considerably after the secured creditors, especially banks, vetoed the Rs 24,731 crore Reliance Retail buyout, which was facing legal hurdles. Amazon had taken Future Group to court for violating the terms of the agreement, which, the e-commerce giant alleges had given it the first right of refusal before selling any stake.
In the earlier Reliance deal, inked in August 2020, as many as 20 Future Group companies were involved.
FRL was the largest company amongst the 19 companies that were first proposed to consolidate with Future Enterprises Ltd and then merge with Reliance Retail Ventures Ltd. At the time of the deal, as many as 11 of the Future Group companies had negative net worth. This included Futurebazaar, Acute Retail, Basuti Sales, Chirag Operating Lease, Hare Krishna , Nice Texcut, Nishta Mall, Ojas Trade Lease, Rivaaz Trade, Taquito Lease, and Unique Malls.
Future Retail Limited, which sells clothing, household goods, and consumer goods through its BigBazaar stores, reported sales of Rs 15,717.09 for the nine months ended December 31, 2019. In 2020-21, the company's sales crashed to Rs 6,261 crore, with net losses of Rs 3,180 crore. The market valuation is at Rs 1,507 crore.
The other big company in the group is Future Lifestyle Fashions Limited, which recorded a turnover of Rs 6,050 crore in the 9-month period ending December, 2019. This company is engaged in the retail of fashion products through its discount chain, Brand Factory. In 2020-21, the company's sales fell to Rs 2,160 crore with net losses of Rs 871 crore. The current market cap of the company is down to Rs 593 crore.