Future Group shares fall up to 20%; here’s why

Shares of crisis-hit Future Group companies plunged up to 20% in early deals on Monday after Reliance Industries (RIL) called off the ₹24,713 crore deal with Future Retail. Weighed down by the development, RIL share price dropped as much as 1.75% to hit an intraday low of ₹2,710.15 on the BSE, in line with the weak broader market. In contrast, the BSE Sensex was trading 479 points lower at 56,717 levels.

Billionaire Mukesh Ambani's RIL, in an exchange filing, said the deal with Future Retail cannot be implemented as lenders to the Future group company voted against Reliance Retail’s proposed takeover scheme. Reliance Retail Ventures Ltd (RRVL), the retail holding company of RIL, had in August 2020 agreed to take over the retail and logistics business of Kishore Biyani-led Future Group but the transaction couldn't be closed as U.S.-based e-commerce major Amazon contested the deal citing violation of some contracts.

“The Future Group companies comprising Future Retail Limited (FRL) and other listed companies involved in the scheme have intimated the results of the voting on the scheme of arrangement by their shareholders and creditors at their respective meetings. As per these results, the shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented,” RIL said in a filing on Saturday.

Following the announcement, shares of Future Lifestyle Fashions hit a lower circuit of 20% at ₹29.40 apiece on the BSE, while Future Supply Chain Solutions locked at 20% lower limit at ₹37.30. In a similar trend, Future Retail dropped 5% to ₹27.8, Future Enterprises dived 10% to ₹5.66 apiece. Among others, Future Market Networks and Future Consumer also plunged 20%.

The majority shareholders and unsecured creditors of six listed Future Group companies - Future Enterprises, Future Consumer, Future Lifestyle Fashions, Future Market Networks, Future Retail, and Future Supply Chain Solutions - had voted in favour of the deal to sell their assets to Reliance Retail, a retail arm of RIL, during the meeting on April 20.

However, the major lenders to the Future Group companies had rejected Reliance Retail’s takeover bid, citing that Reliance lowered the deal value. State Bank of India (SBI), Bank of Baroda (BoB), Union Bank of India, and IDBI Bank are among the key members of the consortium. The decision was taken in a meeting of unsecured creditors of Future Retail Limited held on April 21, in line with the directions issued by the National Company Law Tribunal, Mumbai Bench in an order dated February 28, 2022.

With this the deal stands cancelled. Reliance has already taken over 830 of the 1,400 stores of Future group for payment default of rental dues. The secured creditors had the understanding that RIL won't agree for the earlier offer in the scheme of arrangement for the remaining 550 plus stores, which are 70% non-operational. Since they were not getting any clarity from RIL, the creditors voted against the deal.