The bankers at flagship Future Retail Limited (FRL) retain the personal guarantee of Kishore Biyani, along with his elder brother Vijay Biyani and his cousin Rakesh Biyani, which is difficult to enforce. Moreover, Future Enterprises corporate guarantee of Rs 5,700 crore makes no sense as the company is already a defaulter in the market.
State-owned Bank of India, the FRL’s main lender, has already approached the National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code (IBC).
Bankers are in deep trouble as most of the Future Group’s retail stores have disappeared. Reliance Retail recently jumped on the lucrative 947 stores after the end of the lease agreement with Future Group. The remaining assets are deteriorating due to insufficient funds as well as inventory.
Sources suggest that not all loans are backed by personal and corporate guarantees. Some banks have insisted on personal guarantees from developers or corporate guarantee when loan restructuring was undertaken after the Covid outbreak. As per the agreement, the company’s maximum guarantee was limited to Rs 5,700 crore.
FRL is engaged in the manufacture and supply of fashion products and the leasing of retail facilities. The company had recorded revenue of Rs 3,719 crore for the nine months ended December 31, 2019 when the deal with Reliance was signed. The company’s revenue, however, collapsed to Rs 886 crore, with losses of Rs 1,049 crore in 2020-21. The market valuation of the company is paltry at Rs 279 crore.
The stage is now set for creditors, including banks, to invoke IBC proceedings against Kishore Biyani Group of Companies, which owes Rs 24,000 crore-plus to the banking system. The group companies are now facing multiple lawsuits under the IBC after Reliance Group canceled the Rs 24,731 crore retail deal.
Group companies’ positions weakened significantly after secured creditors, particularly banks, vetoed the Rs 24,731 crore takeover by Reliance Retail, which was facing legal hurdles. Amazon had sued Future Group for violating the terms of the agreement which the e-commerce giant said gave it first right of refusal before selling any stake.
In Reliance’s previous deal, signed in August 2020, up to 20 Future Group companies were involved.
FRL was the largest company among 19 companies that were first proposed to merge with Future Enterprises Ltd and then merge with Reliance Retail Ventures Ltd. At the time of the deal, up to 11 of 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 2020-2021 , the company’s sales collapsed to Rs 6,261 crore, with a net loss of Rs 3,180 crore. The market valuation is Rs 1,507 crore.
The other major business in the group is Future Lifestyle Fashions Limited which recorded revenue of Rs 6,050 crore in the 9 months ending December 2019. This business 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 capitalization of the company has fallen to Rs 593 crore.