AgenciesMore than ₹20,000 crore of loans to Kishore Biyani’s Future Group may slip into a watch-list or be classified non-performing (NPA) by banks as these dues are well past the 90-day deadline for stressed exposure, bankers said.
To be sure, a restructuring plan is underway at Future Group that pioneered organised retailing in India.The owner of the Big Bazaar, Brand Factory and Central retailing formats is technically in default and with the Supreme Court moratorium no longer available, banks will have to mark the exposure as a stressed loan on April 1.
“There is a resolution plan underway and banks have time until April 26 to approve it. However, there is no standstill in classifying these loans as NPAs. If the restructuring goes through, banks may well reverse provisions, but until then loans may be classified as NPAs,” a senior bank executive said.
Future’s loan restructuring is being worked out under the special Covid-19 related framework set out by veteran banker KV Kamath. As part of the process, the group has received an RP4 rating from a rating agency which indicates that the company has a moderate degree of safety in timely servicing of debt obligations. RP1 is the highest safety rating according to the rating matrix.
“The restructuring is under process and banks are working out the treatment of the debt lenders and investors hold. Banks can write back the provisions they make if they classify these loans as NPAs whenever the plan receives approval from the Kamath committee,” said a second banking executive.
Reserve Bank of India (RBI) norms say that banks have to make a 15% provision on secured loans declared as NPAs. Banks had signed an inter creditor agreement as part of the restructuring process for Future, making a 10% provision as required by the central bank.
They are still working out details of the restructuring plan which has to be approved by the Kamath Committee before end of its term in June 2021. Some banks may proactively provide for the loans pending litigation.
Future Group did not reply to an email seeking comment. However, a senior official said the company is confident of working out a plan with banks before April 26. “We have got the ratings and in touch with lenders on the plan. We are confident it will go through and banks will not have to tag us as NPA,” the official said.
Future Retail, which houses the group’s main retail brands like Big Bazaar, and Future Lifestyle Fashions are the two main debt laden companies, holding about ₹20,000 crore of loans. Bankers estimate that another ₹10,000 crore is spread across other unlisted entities that owe money to a clutch of lenders, led by Bank of India.
Late last August, Reliance Retail Ventures agreed to buy the retail assets of Future Group on a slump sale basis for about ₹25,000 crore. However, that deal has still not been completed because US-based Amazon, which owns a 49% stake in Future Coupons, a Future Group holding company, objected to the deal and approached the arbitration court in Singapore, which said it should be suspended pending a final decision.
However, since the past three months, Reliance Retail has started using Future Group’s supply chain unit for its logistics and warehousing needs.
To be sure, a restructuring plan is underway at Future Group that pioneered organised retailing in India.The owner of the Big Bazaar, Brand Factory and Central retailing formats is technically in default and with the Supreme Court moratorium no longer available, banks will have to mark the exposure as a stressed loan on April 1.
“There is a resolution plan underway and banks have time until April 26 to approve it. However, there is no standstill in classifying these loans as NPAs. If the restructuring goes through, banks may well reverse provisions, but until then loans may be classified as NPAs,” a senior bank executive said.
Future’s loan restructuring is being worked out under the special Covid-19 related framework set out by veteran banker KV Kamath. As part of the process, the group has received an RP4 rating from a rating agency which indicates that the company has a moderate degree of safety in timely servicing of debt obligations. RP1 is the highest safety rating according to the rating matrix.
“The restructuring is under process and banks are working out the treatment of the debt lenders and investors hold. Banks can write back the provisions they make if they classify these loans as NPAs whenever the plan receives approval from the Kamath committee,” said a second banking executive.
Reserve Bank of India (RBI) norms say that banks have to make a 15% provision on secured loans declared as NPAs. Banks had signed an inter creditor agreement as part of the restructuring process for Future, making a 10% provision as required by the central bank.
They are still working out details of the restructuring plan which has to be approved by the Kamath Committee before end of its term in June 2021. Some banks may proactively provide for the loans pending litigation.
Future Group did not reply to an email seeking comment. However, a senior official said the company is confident of working out a plan with banks before April 26. “We have got the ratings and in touch with lenders on the plan. We are confident it will go through and banks will not have to tag us as NPA,” the official said.
Future Retail, which houses the group’s main retail brands like Big Bazaar, and Future Lifestyle Fashions are the two main debt laden companies, holding about ₹20,000 crore of loans. Bankers estimate that another ₹10,000 crore is spread across other unlisted entities that owe money to a clutch of lenders, led by Bank of India.
Late last August, Reliance Retail Ventures agreed to buy the retail assets of Future Group on a slump sale basis for about ₹25,000 crore. However, that deal has still not been completed because US-based Amazon, which owns a 49% stake in Future Coupons, a Future Group holding company, objected to the deal and approached the arbitration court in Singapore, which said it should be suspended pending a final decision.
However, since the past three months, Reliance Retail has started using Future Group’s supply chain unit for its logistics and warehousing needs.
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1 Comment on this Story
 | Bilu 1 hour ago Future group is hopelessly managed. The group showrooms are excellent, price as usual not competitive but offering discount 10 percent now. Itâ s downfall on Acc of its employees managing shops. Hopeless employees ( talking of Kolkata Newtown AA2 home centre) |