Despite calling off the deal with Future Retail, Reliance Industries still walks away with 947 small and large format store premium that were once occupied by Future Retail stores.
According to sources close to Reliance, the lenders’ decision to vote against the ₹24,713-crore deal with Future Retail will have no impact on the move to take over the lease of the stores. “The owners of the stores terminated the lease with Future Retail since they could not pay the rent and leased the same stores to us. This is separate from the earlier announced merger deal with Future,” the person said.
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In February, BusinessLine had reported that multiple stores of Future Retail’s Big Bazaar and Brand Factory amongst other brands under the Future Retail umbrella have been taken over by Realince.
Future Retail has defaulted in payment of dues to the owners of the leased premises and many had initiated termination of the lease agreements for repossession of the premises. Reliance stepped in to take over the lease and then further sub-lease all these premises back to FRL so that its business could continue.
342 large format stores
Reliance had taken over 342 large format stores, such as Big Bazaar, Fashion, Big Bazaar (fbb) and 493 small format stores such as easyday and Heritage stores). However, lenders to Future Retail had objected to the transfer of these stores and had asked the company to take them back. Following this, Future Retail had written a letter to Reliance Industries asking it to return the assets and inventory from the 900 stores
Legal experts’ take
Legal experts said the rejection of the merger deal will not impact the independent contractual lease agreements entered into between Reliance and the respective lessors.
“In cases where the earlier leases of stores between Future and such lessors have been terminated or have expired, Reliance may elect to enter into fresh lease contracts, open its retail stores and independently-run the retail business,” said Ketan Mukhija, Partner, Link Legal.
On the other hand, the lenders, too, had issued a public notice informing that they had ‘secured charge’ on the moveable fixed assets and current assets (including receivables, stock, spares, inventories, cash flows) of FRL.
In fact, last week too, State Bank of India wrote a letter to Future Retail seeking accountability on the company’s stores taken over by Mukesh Ambani-owned Reliance. The SBI reiterated that the lenders have rights over the stock, moveable fixed assets in all the outlets of the company, and in the case of its sale, the entire proceeds will need to be used to settle their dues.
The lenders are now in the midst of dragging Future Retail to the insolvency court as the debt-strapped company owned by Kishore Biyani owes over ₹16,000 crore to the lenders.