The lenders of Future group companies are likely to take bankruptcy route as Reliance Retail attaches the stores of the beleaguered retail chain. Reliance Retail’s move to terminate the sub-lease of 950 Future group stores has shocked the lenders as it will throw a spanner in their plans to recover around ₹30,000 crore debt from Future group companies. According to sources, some of the banks want to initiate debt recovery proceedings immediately to safeguard their interests.

Reliance had earlier taken over 200 Future group stores and is in process of rebranding it as Reliance stores. In addition to that, it issued notice for terminating the sub-lease of 835 Future Retail stores and 112 Future Lifestyle stores about a couple of weeks back.

“Reliance’s takeover of two-third of Future stores will trouble only the banks. We gave the time to Future as they were trying conclude the ₹24,713 crore sell-off deal with Reliance. If they transfer the assets in a backdoor operation, there will not be any deal and the banks eventually will have to recover loans from shell companies,” said a senior banker.

Future Retail Ltd, in an exchange filing, recently said that it received termination notices from Reliance in relation to the sub-leased properties. It has received notices in respect of 342 large format stores, including Big Bazaar, Fashion @ Big Bazaar, and 493 small format stores such as Easy Day and Heritage stores. Most of these stores are closed now. It contributed 55-65% of the retailer’s revenue when it was fully functional. Future group has around 1,700 stores across the country.

Future had not paid lease rents for a good number of its outlets as its business was neck-deep in losses. The flagship company, Future Retail defaulted on its first repayment obligation of ₹3,495 crore in December despite the one-time debt recast. Care Ratings had downgraded the retailer to default grade. Future Retail alone owes ₹6,278 crore debt to the lenders including Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Axis Bank and IDBI Bank.

Facing closure, Reliance transferred the leases of most of the Future stores to its step-down subsidiary, Reliance Retail Venture Ltd and sublet them back to Future to operate the stores. A majority of the inventory at these stores was also being supplied by Reliance through its arm JioMart. The vendors of Future companies had stopped their supplies earlier after the cash-strapped retailer failed to clear the dues of ₹6,000 crore.

Reliance Retail's ₹24,713 crore takeover deal for Future assets has been delayed for more than one and a half years due to the objections raised by Amazon as it holds 49% stake in Future Coupons, the promoter entity of Future Group. Amazon argued that Future Retail violated their contract by entering into a deal with Reliance. The Supreme Court had given time to Future and Amazon till March 15 for an out-of-court settlement. But the talks failed.

Amazon, in a public notice, alleged the transfer of Future Retail Ltd's (FRL) retail assets is being done in a clandestine manner by playing fraud on courts, tribunal and statutory authorities. "It has now come to light that FRL and its promoters have been trying to remove the substratum of the dispute by purportedly transferring and alienating FRL's retail assets comprising the retail stores in favour of the MDA group," said Amazon in a public notice.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.