Home / Industry / Retail /  Future Retail misses 3,495 crore repayment, ratings downgraded to default

MUMBAI : Future Retail Ltd has defaulted on its first repayment obligation of 3,494.56 crore due on or before 31 December following the one-time debt recast and was therefore downgraded to default grade by Care Ratings, it said in two separate regulatory filings.

Care Ratings has downgraded Future Retail’s non-convertible debentures, long-term bank facilities and short-term bank facilities to default grade (Care D).

“We refer to the obligation on the company to pay an aggregate amount of 3,494.56 crore as defined in the one-time restructuring (OTR) plan to various consortium banks and lenders, who are parties to the agreement under OTR plan, on or before 31 December 2021," Future Retail said.

Future Retail’s 19-month moratorium ended on 30 September. Its lenders include Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Indian Bank, Central Bank of India, Axis Bank and IDBI Bank. According to data from Care Ratings, Future Retail owes banks 6,278 crore.

Due to ongoing litigation with Amazon.com NV Investment Holdings LLC, the company could not complete the planned monetization of the specified business as envisaged in the one-time restructuring plan to repay lenders on the due date, it said.

“As discussed with lenders, the company would be co-operating for completing the monetization of the specified business within next 30 days as per directions of banks to resolve the current situation," it said.

Under the Reserve Bank of India’s 6 August debt recast framework, Future Retail has a review period of 30 days from the due date to repay lenders. If it is still in default with any lender at the end of this period, it will be classified as non-performing. In that case, provisions would have to be made as if the recast never occurred, forcing banks to classify the account as “doubtful", requiring at least 25% provisions subsequently.

Under RBI rules, banks must classify NPAs into three buckets—substandard, doubtful and loss asset—depending on default duration. The longer bad loans remain on a bank’s books, the slimmer the chances of them being recovered.

“The company shall intimate the further development and updates in this connection as and when applicable," it said.

In August 2020, Reliance Retail Ventures Ltd, a unit of Reliance Industries, agreed to buy Future Group’s retail assets on a slump sale basis for 24,713 crore. The cash-strapped Future Group is trying to expedite the deal with Reliance to pay creditors and save the Big Bazaar retail chain from a possible collapse.

Mint reported on 25 December that lenders are hopeful that the recent Competition Commission of India ruling suspending Amazon’s 2019 deal with Future Coupons Ltd, a group unit, would pave the way for Future Retail’s deal with Reliance Retail.

Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
Catch all the Industry News, Banking News and Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Recommended For You
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout