Home / Companies / News /  Future Retail's loan moratorium ends; what's next for banks?

MUMBAI : Future Retail Ltd’s lenders will meet soon to take stock of the company’s repayment plans after a 19-month moratorium ended on Thursday, although a decision on referring the retailer to a bankruptcy tribunal would be taken later in case of a default, a banker aware of the development said.

The banker said that while the moratorium ended on 30 September, repayments would be due by end-December. That is because Future Retail will have to repay by the end of December its dues for the October-December period. If it fails to make the payment, it would become a defaulter on 1 January. Banks will still have another 90 days before classifying the loans as non-performing, he said.

“The company has informed that it is generating profits and is performing better after the debt recast. However, it is yet to sell non-core assets as part of its commitment to infuse cash into the company, and that is a key constraint," the banker cited above said.

He said lenders would meet again in December to look into the possibility of referring Future Retail to the National Company Law Tribunal (NCLT) for resolution. “That would not only make things difficult for the company, but also lenders," the banker said, adding that debt recast under the Reserve Bank of India’s guidelines was seen as ‘Plan B’ if the deal with Reliance Retail Ventures Ltd (part of Mukesh Ambani’s Reliance Industries Ltd) did not materialize. Inc. is contesting the sale in the Supreme Court.

Spokespeople for Union Bank of India, Future Group and Reliance Industries did not respond to emails seeking comments on the story.

However, a Future Group official said the NCLT’s 28 September decision to allow the Kishore Biyani-led group to hold meetings of shareholders and creditors to seek approval for the sale of assets to Reliance Retail is a step in the right direction. Amazon had filed an application, objecting to the NCLT decision, considering the scheme is pending completion of the arbitration proceedings against Future Retail.

“If we get all requisite approvals, nothing can stop the deal from going through," said the Future official seeking anonymity.

The scheme of arrangement between Future and Reliance Retail entails the consolidation of Future Group’s retail, wholesale, logistics and warehousing assets into one entity —Future Enterprises Ltd—which would then be transferred to Reliance Retail. Last August, Reliance Retail agreed to buy the assets of Future Group for 24,713 crore. The deal has been contested by Amazon, an investor in Future Coupons, which is a shareholder in Future Retail Ltd. While the original deadline of the deal was March, it was extended to 30 September owing to the legal battle with Amazon.

In August 2019, Amazon bought a 49% stake in Future Coupons Ltd (which owns 7.3% equity in Future Retail through convertible warrants), with the right to buy into the flagship Future Retail after a period of 3 to 10 years. After Reliance announced the deal, Amazon dragged Future to the Singapore International Arbitration Centre (SIAC), which passed an interim award barring Future Retail from moving ahead with the deal. Amazon and Future are now fighting a legal battle in the Supreme Court, which recently ruled in favour of Amazon by holding that the award from SIAC was valid and enforceable under Indian laws.

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