The Mumbai Bench of the National Company Law Tribunal or NCLT allows Future Group companies to attend extraordinary general meetings (EGMs) of their shareholders and creditors to seek approval for the sale of assets to Reliance Retail Ltd.
The NCLT urged the corporation to set an appropriate date for the meeting and provided its approval in an order issued on Tuesday.
“The company is pleased to update the stock exchanges that the National Company Law Tribunal, Mumbai Bench, has passed an order allowing the company to hold meetings of its shareholders and creditors to seek approval for the scheme. The NCLT has further rejected the intervention application filed by Amazon,” Future Retail said in a statement.
In August of last year, both Reliance and Future Group announced that Reliance Retail Ventures Ltd (RRVL) will buy Future Group’s complete retail, wholesale, logistics, and warehousing businesses as a going concern for Rs 24,713 crore.
However, the acquisition was put on hold due to a lawsuit filed by Amazon, the world’s largest retailer. Amazon, which owns a 50% stake in Future Retail’s holding company, filed an arbitration complaint, claiming that the deal will turn FRL into a shell company, with the businesses being split up and sold to Amazon’s arch competitor Reliance Retail.
The Supreme Court is now hearing the case. Future Group’s financial metrics had deteriorated while both Amazon and Future were litigating.
In comparison to the previous financial year, all Future Group companies reported enormous losses, a drop in revenues, and a significant increase in debt in FY21.
One of the roadblocks for Future-Reliance Retail has been lifted after NCLT allows Future Group to hold EGMs. Once completed, the transaction will strengthen Mukesh Ambani’s position in the Indian retail business, which is seeing massive investment from foreign e-commerce players such as Amazon and Walmart.
With its new SuperApp, the Tata Group is also focusing on online retail.
The acquisition would aid Future promoter Biyani in reducing debt, both at the promoter and corporate levels, which had risen during the pandemic, forcing the closure of some stores.
Future Retail, Future Consumers, Future Supply Chain Solutions, Future Lifestyle Fashion, Future Brands, and Future Market Network are among the enterprises that will merge into Future Enterprises Ltd (FEL) first, according to the proposal.
Following that, the retail and wholesale operations would be handed to Reliance Retail and Fashion Lifestyle Ltd (RRFLL), RRVL’s wholly-owned subsidiary. RRVL intended to take over the logistics and warehousing operations at the same time.
In exchange, RRFLL plans to issue preferential equity shares worth Rs 1,200 crore of FEL in order to acquire 6.09 per cent of post-merger equity, as well as invest another Rs 400 crore in a preferential issue of equity warrants, which will result in RRFLL acquiring a further 7.05 per cent of FEL upon conversion.
Certain borrowings and current liabilities will be taken over by RRFLL and RRVL, with the remainder of the consideration being paid in cash. The retail and wholesale undertaking’s identified assets and liabilities would be sold as a continuing concern to RRFLL for Rs 5,628 crore on a slump sale basis.
Big Bazaar, FBB, Foodhall, Easyday, Nilgiris, Central, and Brand Factory are among the well-known retail and wholesale brands. Future Group’s retail, wholesale, and supply chain businesses complement Reliance’s retail operations and provide a solid strategic match.
RRVL is a Reliance Industries company that operates in the consumer supply chain and consumer retail sectors through its subsidiaries. Apart from its insurance joint ventures with Generali and NTC Mills, FEL will continue to manufacture and distribute FMCG goods after the deal.
