Future group on brink of collapse, lenders begin work to take firms to NCLT

Banks have already made provisions for loans give to entities like Future Retail and Future Enterprises

Lenders to Future group companies are preparing legal action, which includes reference to National Company Law Tribunal (NCLT), to recover dues and secure their interests after the retail chain’s deal to sell the business to Reliance Industries collapsed.

Lenders led by state-owned Bank of India last week took Future Retail Ltd, a non-performing asset, to NCLT and their application is under process. 

Senior public sector bankers said the fate of all Future group entities is tied and they would all be brought before NCLT. While in the beginning there may be separate action for each entity for NCLT, the option remains open for legal forums to consider a group approach to enhance prospects for resolution.

Banks started making provisions early in Financial Year 2021-22 for loans give to entities like Future Retail and Future Enterprises Ltd (FEL) were restructured under regulatory package for entities hit by Covid-19 pandemic.

Most lenders are looking to make a maximum provision (approaching 100 per cent), in the fourth quarter of FY22 (Q4FY22) for group exposures, executives said. The lender's exposure to Future group is pegged between Rs 24,000 to Rs 25,000 crore.

State Bank of India executive said the bank has already made full provision for group exposure pegged at Rs 2,900 crore. At present, this account is with a wing that handles corporate banking. Now, it would be moved to the Stressed asset management group for resolution and recoveries.

Reliance called-off its deal with Future group after secured creditors to Future retail rejected it. The shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented, RIL informed BSE.

The meetings of shareholders, secured and unsecured creditors to future group were held to seek approval for the scheme of arrangement between 20 Future Group companies, including six listed, with Reliance Retail Ventures Ltd etc.

As a part of deal Reliance Retail was to purchase the retail and logistics businesses of Future Group for around Rs 25,000 crore, which was first announced in August 2020.

FEL told BSE the company between March 23 to 31 this year had to pay Rs 2911.51 crore to a consortium of banks and lenders. The company was unable to discharge its obligations under the review period of 30 days. It could not do so as it was not able to complete the monetisation of the specified investments as contemplated in One Time Restructuring Plan (OTR) on due dates, FEL said.