Future group creditors who are full of debt are considering clubbing all group companies under the bankruptcy process after Reliance Industries Ltd cancel an agreement to acquire retail assets, logistics, and company warehouse supported by Kishore Biyani.
Some bankers and legal experts told MoneyControl on Monday that the group bankruptcy process could be the best way going forward for banks to maximize debt recovery.
Group companies where banks have exposure including Future Consumer Ltd, Future Retail Ltd. and Future Enterprises Ltd.
The lender to the group includes the Bank of India, the Union of the Bank of India, the State Bank of India, the Bank of Baroda, and the IDBI Bank, among others. This lender, together, lent more than 28,000 Crore Rs to the group on January 31, according to data sourced by MoneyControl from the bank.
Bank of India on April 14 submitted a bankruptcy process of future retail because it did not pay dues. The future retail owes the RS bank 5,322.32 crore on March 31, according to the Petition of Bank of India at the National Company Law Tribunal (NCLT).
Quick expansion and acquisition of some retail assets have burdened future groups with debt over the past few years. Corporate debt misery is exacerbated by the national COVID-19 locking which suppresses its liquidity position and causes a decrease in ranking.
The future retail has made a loss of 4,445 Crore Hospital in the last four quarters, the company said in the submission of an exchange on February 26.
In submitting the stock exchange on April 23, Reliance Industries said an agreement of $ 3.4 billion to take over the future retail retail assets could not be applied because the creditors guaranteed by the company had “voted against the scheme.”
While more than 75 percent of Future Group shareholders and unsecured creditors have chosen to support agreements with Reliance, 69.29 percent of creditors who are guaranteed to reject the agreement and the remaining 30.71 percent votes to support it, the future retail said in the submission of exchange on 22 April April .
Wait and Watch Games
“The plan is now to start the bankruptcy process of all future group companies. Obviously, the majority of lenders are not happy with what Reliance offers in the agreement, and is not sure about some aspects, “said a banker with a leading bank who has exposure to future groups.
“Now, there is no choice but to wait and watch. After the formal bankruptcy process begins, let Reliance come and send a new offer, “added the banker, who asked for anonymity.
Other senior bankers with state -owned banks say: “At present, banks are looking for ways to get the best value from future group assets, and the process of starting the bankruptcy process of all future group companies will begin immediately.”
Ideally, when the bankruptcy process begins, the Creditor Committee chose a resolution professional who took care of the entire debt resolution process. The Committee also called for prospective applicants to submit company asset offers and vote for the highest bidder.
Uncertainty in front of the bank
To be fair, the bank has made provisions on future group accounts to protect their balance sheet from the default potential. Given the history of the long -drawn bankruptcy process, analysts say this can mean banks will take a long time to recover their loans.
According to Asutosh Mishra, head of research at Ashika Stock Broking, even if there are prospective applicants, offers tend to be close to group liquidation values and that can mean “minimal recovery” for lenders.
“Apart from a number of major cases, the overall recovery of the IBC process is very low for banks, and this time, considering the (legal) of the future group, it should not be different,” Mishra said. IBC is short for the bankruptcy and bankruptcy code.
Mishra refers to the Group’s bankruptcy process in the future, which faces legal obstacles from the Amazon.com online retail giant Inc.
