HOW DID THIS HAPPEN?
Future group stakeholders have been freed from a $2.2 billion hit on their vulnerability to the syndicate. This happened after the company declared the sale of its whole business to Reliance Ind. (RIL) for Rs 24,713 crore on Saturday. Reliance Industries buys Futures group stakes with the vision of growing its retail hand. After the deal, Mukesh Ambani’s Reliance Retail Ventures (RRVL) will retain 13.14% of stake in Kishore Biyani’s Future Enterprises LTD and will exclusively own the debt of Rs 12,500 crore. A total exposure of Rs 16,000 crores to agglomerate is led by the Lenders of Axis bank. According to the reporters of analysts, they believe that there is probably less chance of haircuts to lenders who have lent for business orations. Bank of India led union stands with an exposure of Rs 5750 crore, Axis bank adheres Rs 1250 crore and Bank of Baroda adheres Rs 750 crore, as per the data composed by ICICI securities. Nevertheless, promoter level debt will stay with the promoters which are worth Rs 11,900 crore, according to a person who spoke on circumstances of anonymity. Lenders may have to take a hit on this debt as claimed by the analysts after the discussion with the lenders after this week.
The future group is a fundamental capital investment in the books of banks and had the advantage of not repaying the loan during the moratorium period which will come to an end on 31st August 2020. Future group is going to pay back some of the debenture dues from the proceeds as the executive director claimed that there were no haircuts involved as per the discussion with the lenders that took place. The rest of the debentures will be cleared by Reliance Industries, as Reliance Industries buys Future Group and also buys their debt. The widespread pandemic leading to a nationwide lockdown started affecting the businesses and this started deteriorating Future Group’s already staggering financial status. It was quite difficult for the Kishore Biyani’s Future Group to handle such a fragile situation of declining financial status due to the ongoing pandemic. As per records released by the company public records, the company had fortified with a debt of Rs 12,778 crore in September 2019. As of March 2019, the chief company of the future group, Future Retail has a total debt of Rs 2,657 crore.
THE CRUX OF THE MATTER
Due to the spread of Covid-19, nationwide lockdown was declared. For which the company had to restrict its business operations to cooperate with government regulations. Therefore, the company missed the payment of its interest on 22nd July, which was 5.60 per cent or 2025 dollar notes. As listed on Singapore Stock Exchange, this lucidity status was responsible for missing the service of paying the interest amount to the USO Notes on 22nd July 2020. The exchange’s information included that, terms of issuing of the UNO Notes implements an additional time of thirty days for paying the amount of interest from the payable date. The time period of grace for Future Group of thirty days to pay the amount of interest has ended now.
The Retail and Wholesale pursuit is being passed to Reliance Retail and Fashion Lifestyle Ltd (RRFLL) which is altogether a new subsidiary of Reliance Retail Ventures Limited (RRVL) and is one of the biggest Reliance Industries Investments as per the deal between the Future Group and Reliance Retail Ventures Limited. All the logistics and warehousing pursuits are already being passed to Reliance Retail Ventures Ltd increasing the Reliance Industries Investments. According to the reports posted by The Mint on 11th June 2020 Reliance Retail was planning to take possession of business from the mortgaged Future Retails. Further, the release also stated that the deal is subject to alternation as laid out in the commixture plan of composition. As Reliance has been receiving huge checks of investments from major market players like Facebook, KKR investments, Vistas, Abu Dhabi’s investors, Saudi Aramco and Google, it was just a beginner of various future investments to come. With these Reliance Industries, is aiming to capitalize on the digital potential of the economy and how he can acquire the largest share of the Indian economy.
Reliance Industries Investments also proposes to make an investment of Rs 1,200 crore in the advantageous issue of integrity shares of Future Enterprises Ltd (FEL) to access the 6.09 percent of post-merger integrity and Rs 400 crore in a special issue of integrity warrants. This includes that on the transformation and payment of 75% of the balance of the price when issued, will conclude in Reliance Retail and Fashion Lifestyle Limited acquiring a 7.05% in the FEL. Future Retail’s net profit was down by close to Rs 164.56 crore on a condensed basis in Q3FY20 as compared with Rs 197.60 crore a year ago. The Gross revenue of the undertaking decreased from Rs 5,368 crore in Q3FY19 to Rs 5,193.19 crore in Q3FY20.
Reliance Industries will hold 13.14 percent in the Future Group. This helped the future group from getting laid on debts and also provided a chance to come up with an aforenamed business that will favor the stakeholders of both the companies. Reliance Industries has launched a whole new franchise, Reliance and Fashion Lifestyle Limited (RRFLL) and this operation will make sure that all the retails are passed on to RRFLL. This deal also had positive sentiments on the stock market as the Reliance Industries Shares rose by 1 percent on the Nifty and Sensex. This deal has brought a gain of 2% on Future Group’s pursuit. As Reliance has come up with its own new subsidiary, its stakes may increase as the lockdown is slowing going towards the direction of unlocking. The Future Group had crossed its due date of paying the amount of interest during its moratorium. However, a magnificent move by the Reliance Industries has saved the company from getting laid on debts. Nevertheless, this was an ongoing discussion between both the companies for the betterment of both businesses while facing such odd situations.