Future Lifestyle Fashions Ltd (FLFL), a part of the debt-ridden Future Group, has received two resolution plans from potential bidders for its insolvency process, according to a regulatory filing by the company. The names of the bidders have not been disclosed yet. The company owes Rs 5700 crore to creditors, including 11 banks, as per the list of claims submitted by the resolution professional (RP) appointed by the National Company Law Tribunal (NCLT).
FLFL, which operates retail chains such as Central and Brand Factory, as well as exclusive brand outlets (EBOs) and multi-brand outlets (MBOs) of several apparel labels, was admitted for corporate insolvency resolution process (CIRP) on May 4, 2023, following an application by Bank of India. This is the third company of the Kishore Biyani-led Future Group to face insolvency proceedings, after Future Retail Ltd and Future Enterprises Ltd.
The company reported a loss of over Rs 2500 crore in FY22
FLFL was created out of the demerger of the fashion business of Future Retail in 2016. It was a leading lifestyle and fashion brand selling apparel and accessories across the spectrum. However, the company faced severe financial stress due to the Covid-19 pandemic, which disrupted its operations and sales. In FY22, the company reported a revenue of Rs 2994 crore and a loss of over Rs 2500 crore, burdened with heavy interest costs and other expenses.
The company had entered into a one-time restructuring (OTR) plan with its lenders in 2022, but it failed to meet the conditions. It also explored various options for asset monetisation, but none of them materialised. In May 2023, when the bankruptcy proceedings started, the company had about 26 leased stores, down from 331 stores at the end of 2021.
The first meeting of the committee of creditors was held on June 6, 2023
The RP of FLFL, Dilip Dixit, has provisionally admitted claims of Rs 2117.03 crore and claims worth Rs 38.5 crore are under verification, as per the latest data shared by the company on the exchanges. A committee of creditors (CoC) of FLFL has been formed, comprising 12 financial creditors, as per the provisions of the Insolvency and Bankruptcy Code (IBC).
The first meeting of the CoC was held on June 6, 2023, in which the RP presented the status of the CIRP and the resolution plans received. The CoC also discussed the appointment of a forensic auditor and a valuer for the company. The RP has invited suggestions from the CoC members on the evaluation criteria and the timeline for the resolution process.
The resolution process may face challenges due to the ongoing legal disputes
The resolution process of FLFL may face some challenges due to the ongoing legal disputes involving the Future Group and its deal with Reliance Retail. The deal, which was announced in August 2020, involved the sale of Future Group’s retail, wholesale, logistics and warehousing businesses to Reliance Retail for Rs 24713 crore. However, the deal was opposed by Amazon, which had invested in Future Coupons, a promoter entity of Future Retail, in 2019.
Amazon claimed that the deal violated its contractual rights and initiated arbitration proceedings in Singapore. The Singapore International Arbitration Centre (SIAC) passed an interim order in October 2020, restraining Future Group from proceeding with the deal. Amazon also approached the Indian courts and regulators to enforce the SIAC order. Future Group, on the other hand, challenged the validity and enforceability of the SIAC order and sought approval for the deal from the Indian authorities.
The legal battle between Amazon and Future Group is still pending before the Supreme Court of India, which has stayed the proceedings in other courts and forums. The outcome of the case may have implications for the resolution process of FLFL and other Future Group companies, as the deal with Reliance Retail was expected to provide them with funds to repay their debts and revive their businesses.