Future Retail (FRL) said on Wednesday that it is committed to regaining control of the hundreds of stores taken over by the Reliance Group, and that Reliance’s “drastic and unilateral action” caught them off guard.
In a regulatory filing, FRL stated that its board has expressed strong opposition to Reliance Group’s action and has put the company on notice to reconsider all other actions taken in the last few days.
FRL’s board has also notified Reliance Group that assets belonging to FRL and located inside these stores, such as store fixtures, store infrastructure, merchandise, inventory, and so on, have been hypothecated as security in favour of the FRL lenders. The board has requested that Reliance Group ensure that possession of the secured assets is not transferred and that it is kept in good condition for the benefit of the lenders.
FRL stated that following the announcement of the Reliance Retail merger in August of last year, it had been unable to raise capital and had failed to make some lender repayments. Following that, several lessors issued termination notices and filed lawsuits to recover their dues and evict FRL.
To keep the business running and protect the interests of all shareholders, Reliance signed new leases with these lessors and subleased them to FRL on a leave-and-licence basis.
Reliance Retail has taken steps to terminate the sub-lease agreements for 947 Future Group stores, with plans to reopen them after reconciling stock and inventory positions and rebranding them. The stores are expected to be renamed following this. The Emergency Arbitrator (EA) of the Singapore International Arbitration Centre had barred FRL from proceeding with its Rs 24,713-crore merger with Reliance Retail.
Concerned about the store transfer, FRL lenders moved to protect their loans on Tuesday. While no decision has been made, banks are thought to be considering using the Debt Recovery Tribunal (DRT) rather than a CIRP (corporate insolvency resolution plan). In its letter to the exchanges on Wednesday, FRL stated that it has notified the Reliance Group that assets such as store infrastructure, fixtures, merchandise, and inventory have been hypothecated as security in favour of the FRL lenders. It stated that it had requested that these not be transferred to Reliance Group.
Amazon asked the Supreme Court on Wednesday to prevent Reliance Retail from opening a new store in place of FRL’s Big Bazar.