Jindal India Challenges Reliance Retail Ventures For Debt Resolution Battle For Future Enterprises; The Stakes Have Never Been Higher

Jindal (India), a company affiliated with the family controlling Jindal Poly Films, has entered the fray to resolve the debt issues of Future Enterprises, following the insolvency and bankruptcy proceedings under the Insolvency and Bankruptcy Code (IBC).

The development may set the stage for a potential competition with Reliance Retail, which is currently deliberating until October 30 about whether it will participate in the bidding process for Future Enterprises.

The specifics of Jindal’s bid remain confidential, as is customary for financial bids submitted under the IBC; the unveiling of this offer is contingent on Reliance Retail’s decision regarding its involvement in the bidding process.

Future Enterprises carries a debt burden of Rs 11,000 crore, having been admitted for insolvency proceedings on February 27 after a creditor claimed the company had defaulted on payments.

In contrast to its sister concern, Future Retail, which received bids only from scrap dealers, creditors are optimistic about a more favourable outcome from the insolvency process of Future Enterprises; the same is especially relevant because Future Enterprises holds stakes in life and general insurance joint ventures formed with Italy’s Generali group in 2006, a venture initiated by Future Group promoter Kishore Biyani.

Notably, Future Retail’s creditors face substantial losses on their loans, with financial creditors, including banks, being owed Rs 20,000 crore and the highest bid received for the company thus far is only Rs 550 crore from a Gurugram-based online scrap dealer.

If the insolvency process of Future Enterprises results in a more favourable debt resolution acceptable to all creditors, the winning bidder stands to gain ownership of a 25.5% stake in Future Generali’s general insurance company and nearly a 9% stake in Future Generali’s life insurance company.

In May of the previous year, Generali valued the general insurance company at Rs 5,000 crore when it increased its stake from 49% to 74%, paying Rs 1,267 crore to leverage the liberalized foreign direct investment guidelines in the insurance sector.

Debt-ridden Future Enterprises Limited (FEL) had earlier received resolution plans from Mukesh Ambani’s Reliance Retail Ventures, Jindal (India) Ltd, and Donear Industries-owned textiles maker GBTL Ltd as part of the corporate insolvency process, according to an exchange filing by the company.

On February 27, the National Company Law Tribunal (NCLT) initiated corporate insolvency proceedings for Kishore Biyani’s Future Enterprises; the Mumbai bench of the NCLT ordered the “commencement of corporate insolvency resolution process” for the firm, which involves auctioning the company to recover unpaid dues.

The Resolution Professional, Avil Menezes, has acknowledged claims of Rs 12,265 crore from lenders and Rs 23 crore from fixed deposit holdersas numerous trusteeship companies have filed claims due to the significant bond borrowings by the Kishore Biyani-led Future group firm.

Centbank Financial Services has the largest claim at Rs 3,344 crore, followed by Axis Trustee Services at Rs 1,341 crore and Vistra ITCL (India) at Rs 210 crore.

FEL has also received claims from employees, state tax departments, and GST authorities, amounting to Rs 2.58 crore and Rs 14.75 crore, respectively.

Future Enterprises reported multiple defaults on interest payments, including a recent default on securities interest worth Rs 6.07 crore; these defaults had raised concerns among creditors and lenders.

Several companies within the Kishore Biyani-controlled Future Group, including Future Retail Ltd, Future Lifestyles Fashion Ltd, and Future Supply Chain Ltd, are undergoing insolvency proceedings at different stages.

The Future Group faced financial challenges worsened by the nationwide lockdown imposed in 2020 due to COVID-19, as many of its hypermarket stores located in malls were closed for extended periods, severely impacting sales.

Additionally, a deal with Reliance Industries-linked subsidiaries, aimed at taking over the entire business in a multi-stage transaction, faced legal challenges from Amazon.com, alleging a violation of shareholder agreements.

In March 2022, Reliance Industries Limited (RIL) took over 900 Future Retail stores due to non-payment of rent. In April of the previous year, most secured lenders rejected the deal with Reliance Industries, leading to the admission of Future Group firms into insolvency proceedings.

The Last Bit,
The debt resolution of Future Enterprises is far from over, and Jindal India’s entry into the fray adds a new layer of complexity to the proceedings, pitting it against the formidable Reliance Retail Ventures.

As the creditors, lenders, and stakeholders watch closely, the outcome of this contest will have significant implications for the fate of Future Enterprises and only time will reveal which entity emerges victorious and chart the course for Future Enterprises’ future.