Why has Bank of India filed the insolvency petition against Future Retail?

You are right that Bank of India filed insolvency petition against Future Retail, which would perhaps be the beginning of the end for the Future group in India. Ironically, it was the Future group that kicked off India’s retail revolution with a chain of Big Bazaar department stores about 20 years back. At one point, Kishor Biyani was christened the Sam Walton of India, in the hope that he would be able to create the equivalent of Wal-Mart in India.

Bank of India, which leads a consortium of lenders to the Future group, filed its application under Section 7 of the Insolvency and Bankruptcy Code, 2016. Bank of India has cited a payment default. Future Group overall owes its lenders more than Rs.27,000 crore. This will also bring an end to the Rs.24,713 crore asset sale to Reliance Industries. The deal has already been objected to by Amazon on the basis of not given them first right of refusal.

IN fact, the timing of the application is important because the substantive aspects of the validity of the deal between Amazon and Future are still awaiting a final decision by the Supreme Court. Future Retail has already stated that it needs close to Rs.12,027 crore to repay its outstanding debt falling due in the next quarter. It has already missed a massive Rs.3,494 crore payment to Bank of India, post which the bank had moved the NCLT.

In a recent development, Reliance had assumed charge of most of the stores of Future group after they could not pay the lease rentals. For most of the stores, the landlords had leased the stores to Reliance, which had sub-let to the Future group. Effectively, what is left in the Future Retail business is just a shell with most of the business already being hived off to the Reliance group via its stores.