Future Group To Seek Stay On NPA Tag Ahead Of Repayment Deadline

Future Group is looking to file a petition with the Supreme Court, seeking a stay on its flagship company being tagged as a non-performing asset, three people with direct knowledge of the matter confirmed.

While the retail company is still in the process of finalising the petition, it is seeking that lenders be stopped from classifying Future Retail Ltd. as an NPA. The petition could be filed as early as Monday, the people cited earlier said.

Reuters had first reported on Jan. 20 that Future Group is mulling such a proposal.

According to the first of the three people cited earlier, Future Retail is in the process of selling its small format stores under the Easyday brand. However, the sale cannot be completed this month, as Future Group continues to grapple with legal challenges mounted by American retailing giant Amazon Inc.

In a notification to the exchanges on Jan. 1, Future Retail stated it had missed paying Rs 3,494 crore worth dues to various consortium banks and lenders. This was a key requirement under the one-time restructuring scheme, which lenders had approved in early 2021. Future Group was provided with a 30-day grace period, according to the exchange notification.

Failing this payment, the restructuring plan would become infructuous and the account would be classified as NPA.

The second of the three people quoted above, an executive at a public sector bank with exposure to Future Retail, said that if a court order prohibits NPA classification, it could save lenders from making additional provisions against the account. Banks are required to immediately make 15% provisions against an account classified as NPA.

Most lenders have set aside 10% provisions against the account, as is required by the Reserve Bank of India, as part of the one-time restructuring scheme, the second person said. While immediate provisions will be small, lenders fear that an NPA classification could jeopardize Future Group's proposed deal with Reliance Retail Ventures Ltd, which could lead to a rapid rise in provisions later.

If the deal with Reliance Retail falls through, lenders will be forced to consider insolvency petitions against Future Group companies, the second person said. Any indication of going down the insolvency route could lead to operational creditors and lessors reviewing their contracts with Future Group, which will then affect the resolution process, this person said.

A query mailed to Future Group on Monday was not immediately responded to.