Over 412,000 public shareholders own 85.69% of Future Retail, with the Kishor Biyani-led promoter group holding only 14.31% stake as of March 31.
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While retail investors have written to the Securities and Exchange Board of India (SEBI) and exchanges, InGovern has separately asked SEBI to reverse the acquisition of Reliance Industries Ltd’s Big Bazaar Stores, conduct a forensic examination of Future Retail’s finances, it said. Make sure it can repay creditors and protect the company’s shareholders from further losses. Mint has reviewed a copy of letters written by investors and advisory firms to SEBI.
In a surprise move in February, Reliance Industries, which had initially offered to buy the assets of Future Group 24,713 crore, started taking over hundreds of Big Bazaar stores at prime locations across the country, taking away Future Retail’s primary revenue source. With Future Retail shares falling, Reliance took control of a total of 950-odd Big Bazaar stores.
Reliance, which took over the leases of hundreds of Future Retail stores, even allowing the company to run them, exercised its right to take control of the stores as debt-laden Future Retail raised rents and other costs. defaulted on payments.
Shares of Future Retail have lost 63.1% since Reliance’s acquisition of Future Retail Stores went public on February 26. However, the stock continued to decline after Amazon blocked Reliance’s acquisition of Future Group’s retail, wholesale and other assets.
In the letter dated April 13, InGovern sought the intervention of SEBI to conduct a forensic audit of Future Retail to examine the behavior of its promoters.
In the letter, InGovern also brought to the notice of SEBI the changes in the directors and key managerial personnel in the last one year. These include Shailendra Bhandari becoming an independent director on 30 April 2021, Sridevi Badiga resigning as an independent director on 1 June 2021, Rahul Garg resigning as an independent director on 14 March 2022 and CEO Sadashiv Nayak on 25 August. Including joining and resigning in 2021. 31 March 2022.
“At present, the company has two executive directors and three independent directors, without a minimum number of six directors on the board. All these resignations of independent directors and newly appointed CEO indicate that all is not well with the company and Future Group, despite the ongoing dispute with Amazon,” states InGovern’s letter to SEBI. .
“SEBI, as the market regulator, should take into account the change in directors and conduct a forensic audit of the accounts of the company. As we pointed out in our December 2021 letter, the company has committed several related-party transactions in March 2021 that are prejudicial to the interests of minority shareholders,” InGovern said in the letter, calling for a forensic audit.
In another letter dated April 19 to Future Retail’s lenders, InGovern said it was surprising that creditors were initiating insolvency proceedings against Future Retail without first securing the assets of Future Group, which are being liquidated.
“In addition, there is a need for forensic audit of all accounts of Future Group companies. Without these two measures, insolvency would, in itself, be against the interests of all stakeholders- lenders and shareholders,” the letter to the FRL lenders said.
The advisory firm has written to the Finance Ministry and SEBI on 11 December 2021, 11 March 2022 and 13 April 2022.
“There is an urgent need for creditors to withdraw the acquisition of assets and forensic audit of all group companies. We note that there are media reports that State Bank of India has written a letter dated 18 April 2022 seeking accountability at the company’s stores,” reads the InGov letter.
Mint has reviewed a copy of letters sent by retail investors and InGovern.
Vijay Kulkarni, a lawyer and an investor in Future Retail, wrote to SEBI and exchanges on May 4 and May 6, on behalf of himself and other investors, complaining about the unprecedented loss caused by the transfer to shareholders, banks and other stakeholders. Future Retail’s stores to Reliance.
Kulkarni alleged that several directors and key managerial personnel left FRL to avoid accountability. “The willful transfer and alienation of assets must be investigated, which is to a large extent and to a lesser extent,” Kulkarni said in his letter.
Another investor Ramnik Mehta also wrote to SEBI and exchanges in the last week of April, urging the regulator to initiate an audit and reverse the store acquisition by RIL.
On May 3, Mint reported that Amazon was considering involving Reliance in a legal battle with Future Group after the group took control of Big Bazaar stores.
The 28 lenders of Future Group have the right of first charge on the stock, inventory, fixtures, billing system and all other equipment in Big Bazaar stores that have unexpectedly come under RIL’s control.
After taking control of Big Bazaar stores, Reliance reduced its original offer value for Future Retail from $3.2 billion to nearly $2 billion and asked Future Retail’s creditors to do a haircut. Secured creditors rejected the offer.
Amazon’s grounds for making Reliance a party to the lawsuit are that the e-commerce giant is also unable to facilitate the sale of Big Bazaar products on its online platform, and the value of Future Retail has been eroded to such an extent that It’s tough for Amazon. To find a buyer to help Future Retail stay afloat and clear dues.
In his letter, Kulkarni questioned why Future Retail failed to take legal action against Reliance to secure its retail assets.