Future Group lenders will seek bankruptcy for the group after the deal to sell assets to Reliance Industries Ltd (RIL) companies collapsed, three people aware of the development said, expecting a recovery of less than 10% off.
The businesses of the Future Group companies are interdependent, so a holistic solution makes sense, they said. Total loans of Future Group companies as of 31st January amounted to Rs 28,921 crore. The majority of this is accounted for by Future Retail and Future Enterprises.
“There is a possibility that the promoters will offer to rewrite the debt to save the group from bankruptcy,” said one of the people quoted above. “In any case, the lenders would be lucky enough to get a little over 10% back.”
Future Group has not responded to inquiries.
The Bank of India, the leading future retail lender, filed on March 21.
cash flow affected
Lenders will follow the same path for the other defaulting group companies like Future Enterprises, which also missed payments in the last week of March.
Although the National Company Law Tribunal (NCLT) must admit a company within 14 days of referral under the Insolvency and Bankruptcy Act (IBC), the process usually takes at least three months.
The recovery could even be less than 10% as the value of assets on Future’s books is dwarfed by debt. “Reliance’s lease takeover of 946 stores has reduced Future’s cash flow by over 65%,” said one of the people above. “The company does not have sufficient inventory to keep its remaining stores operating, nor does it have the money to pay its employees or vendors. Sooner or later the landlords of these shops will also evict them.”
Reliance took over the business after Future failed to pay the rent.
The main assets remaining with Future Group are about 30 large format stores and about 300 small format outlets, although all are leased. It also has a fully automated supply chain solutions facility in Nagpur and about 20 property stores pledged with various lenders.
Future Retail, which operates retail stores including Big Bazaar, Hypercity, Foodhall, eZone, Easyday and Heritage Fresh, had outstanding debt of ₹14,090.6 crore as of January 31. Future Enterprises, which manufactures, designs, sources and distributes fashion apparel, has outstanding debt of ₹6,880 crore. Future Lifestyle and Fashion, Future Supply Chain and Future Consumer are the other key companies in the group.
Reliance and Future officially called off the £24,713 million deal announced in August 2020 after 69% of secured lenders voted against the plan, while 86% of shareholders and 78% of unsecured creditors voted in favor of the scheme.
Secured lenders voted against selling assets to Reliance because they received no assurance from Future Group that the buyer would support the proposed distribution plan. Future had proposed giving around 45% of the proceeds – valued at Rs 12,612 crore – to Reliance while it would repay the remaining loans over seven years.
A 20-month legal battle between Future Group and Amazon delayed the sale of assets from Reliance group companies. Amazon had challenged the asset sale, claiming that its 2019 agreement with Future Coupon precluded selling assets to Reliance companies.