Over Rs 20,000 crore Future Group loans face risk of NPA tag (2024)

More than Rs 20,000 crore of loans to Kishore Biyani's Future Group may slip into a watch-list or be classified as 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 organized 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 the provisions on these loans, but until then the 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 (ICA) as part of the restructuring process for Future Group, 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 the 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 Ltd, which houses the group's main retail brands like Big Bazaar, and Future Lifestyle Fashions Ltd are the two main debt laden companies, holding about Rs 20,000 crore of loans. Bankers estimate that another Rs 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 Rs 25,000 crore. However, that deal has still not been completed because US based retail giant Amazon, which owns a 49% stake in Future Coupons Pvt Ltd, 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. Since the past few months, the transaction is under dispute in the Delhi High Court and the matter is also listed in the Supreme Court and scheduled for hearing on April 27.

However, since the past three months, Reliance Retail has started using Future Group’s supply chain unit for its logistics and warehousing needs in the food, groceries and fashion retail businesses, even as both firms await the final approvals for their deal for retail assets from NCLT.

Reliance has also extended crucial support to normalise Future Group's other businesses — consumer goods firm Future Consumer and apparel manufacturing company Future Enterprises have received large orders from Reliance Retail, helping it to stay afloat.

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