The businesses of the Future Group entities are interdependent, so a holistic resolution makes sense, they said. The total loans of Future Group companies stood at Rs 28,921 crore on January 31. The majority of this is accounted for by Future Retail and Future Enterprises.
“There is a possibility that promoters may give a debt recast offer to salvage the group from bankruptcy,” said one of the persons cited above. “Either way, lenders would be lucky to recovery anything above 10%.”
Future Group did not respond to queries.
Bank of India, Future Retail’s lead lender, filed a petition seeking insolvency proceedings against Kishore Biyani’s flagship company at the Mumbai bankruptcy court on April 21.
Cash Flow Impacted
Lenders will pursue the same route for the other defaulting group companies such as Future Enterprises that also missed payments in the last week of March.
Although the National Company Law Tribunal (NCLT) has to admit a company within 14 days of being referred under the Insolvency and Bankruptcy Code (IBC), the process typically takes at least three months.
Recovery could even be less than 10% since the value of the assets on Future’s books are dwarfed by the debt.”The lease takeover of 946 stores by Reliance has reduced Future’s cash flow by over 65%,” said one of the persons cited above. “To sustain operations of the remaining stores, the company does not have adequate inventories or the money to pay its staff or vendors. Sooner or later, the landlords of these stores too will chase them out.”
Reliance had taken over the stores after Future failed to make rental payments.
The main assets that remain with Future Group are about 30 large-format stores and about 300 small-format outlets, although all are on lease. It also has a fully automated supply chain solutions facility in Nagpur, and about 20 ownership stores pledged with different lenders.
Future Retail, which operates retail stores such as Big Bazaar, Hypercity, Foodhall, eZone, Easyday and Heritage Fresh, had outstanding debt of ₹14,090.6 crore on January 31. Future Enterprises, which manufactures, designs, procures 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 group companies.
Reliance and Future formally called off the ₹24,713 crore 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 favour of the scheme.
Secured lenders voted against the sale of assets to Reliance since they did not receive any comfort from Future Group that the buyer would support the proposed distribution plan. Future had proposed transferring about 45% of the proceeds – amounting to 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 of Reliance group companies. Amazon had challenged the sale of assets, alleging that its agreement with Future Coupon in 2019 barred the sale of assets to Reliance entities.