Lenders to Kishore Biyani’s Future Group are planning to proceed with the restructuring of the debt owed by group companies under the Reserve Bank of India’s one-time restructuring scheme, three people with direct knowledge of the matter said.
Lenders led by State Bank of India have asked for restructuring plans to be submitted so they may conclude the process under the scheme by March 31. The scheme was invoked in November 2020, giving lenders time till May 2021 to implement a plan.
The companies seeking debt restructuring include flagship Future Retail Ltd., fast-moving consumer goods company Future Consumer Ltd., apparel company Future Lifestyle Fashions Ltd., logistics firm Future Supply Chain Solutions Ltd, among others, according to two of the three people cited earlier. The one-time restructuring scheme will be implemented alongside the process to conclude a planned deal with billionaire Mukesh Ambani’s Reliance Retail Ltd.
Future Group’s cumulative debt stands at around Rs 30,000 crore, the two people said. To begin with, the restructuring plans will aim to defer the repayment of all dues. Once the deal with Reliance Retail is closed, dues worth about Rs 12,700 crore will be moved to the new owner’s balance sheet and terms would be reset accordingly, said the two people cited earlier.
Reliance Retail will infuse Rs 2,800 crore into Future Enterprises Ltd., where it will retain some stake, according to one of three people cited earlier. At least a portion of this is expected to be paid to lenders of the group. Further, Future Group intends to sell its life and general insurance businesses, with some part of the proceeds used to settle the debt.
The Future Group has initiated a viability study across group companies, which will be used to decide on final contours of the restructuring, two of the three people quoted above said. The one-time restructuring scheme of the RBI also requires the borrower to get an independent credit evaluation before lenders can approve the plan. Once the restructuring plan is approved by the lenders, they would also need to go through a review by a committee led by veteran banker KV Kamath, as is required for large corporate accounts under the RBI’s scheme.
Queries sent to Future Group and lead lender SBI on Tuesday did not yield a response.
Why Future Group Debt Needs Restructuring
The Biyani-led group is one of the few large corporates which have sought to restructure their dues under the RBI’s one-time restructuring scheme.
The pandemic forced the group to shut stores for months because of the nationwide lockdown imposed between March and June 2020. The pandemic had also affected the movement of goods across the country, which affected Future Group’s logistics businesses.
Meanwhile, the proposed deal with Reliance Retail has faced legal troubles due to objections raised by Amazon India. Earlier this month, a single-judge bench of the Delhi High Court stayed the deal, pending further orders. On Feb. 8, a two-judge bench of the same court lifted the stay order and allowed Future Group to file for a scheme of arrangement with the National Company Law Tribunal to proceed with the sale.
Once the scheme of arrangement is filed, Future Group will need to take approvals from shareholder, lenders, regulators and other stakeholders to complete the sale process.
This process could take months to finish and Future Group would need financial restructuring till the sale can be completed, the people quoted above said.
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