Lenders of are likely to seek buyers for the small-format stores to recover dues amounting to Rs 3494.5 crore after the Kishore Biyani promoted hypermarket failed to honour payments scheduled on 31 December, said two people aware of the matter.
The lenders may take this step since the account would be classified as a non-performing loan if the payment does not come through during the grace period that ends on January 30 as per the one-time restructuring scheme signed between them and Future Retail in April 2021.
Future Retail was unable to sell these stores to a third party since it had agreed to sell them to Reliance Industries-linked companies as part of an arrangement dated August 29, 2020. However, the deal has been delayed due to a series of litigations between Future group and Amazon.com over allegations of breach of the shareholder agreement.
Due to the litigation, the long stop date of the agreement with Reliance was extended to March 31, 2022. Until then, the Future Group is bound by the 2020 agreement with
and thus cannot sell the stores to others. But this does not prevent lenders from attempting to sell small-format stores since they are part of collaterals against the loan, the people said.
Amazon may attempt to block any attempt to sell the small-format stores by seeking a stay order. Currently, it is seeking to block Future Group’s proposed deal with Reliance Industries claiming its earlier agreement with Future Coupon bars Future Retail from selling its assets to Reliance Group entities.
“For lenders, this is a last-ditch attempt to prevent the account from slipping into NPA on January 30,” said a banker.
Future Retail did not respond to the request for comment.
In a notice to the stock exchange on January 1, the company had said that it “would cooperate to complete the monetisation of the specialised business within 30 days as per directions of banks to resolve the current issue.” Future has 800-850 small-format stores across India contributing about 20% of Future Retail’s earnings, a third person said.
On February 2, NCLAT will hear Amazon’s appeal against the Competition Commission of India suspending the approval it had granted on the e-commerce giant’s USD 200mn investment in Future Coupon. Although NCLAT did not grant interim relief to Amazon, it did ask both parties to file a response in 10 days.
Separately on January 11, the Supreme Court reserved a verdict on appeals filed by Future group firms against a February 2021 Delhi High Court order by Justice JR Midha putting on hold Rs 24,713 crore Reliance-Future deal by enforcing interim emergency arbitration award by Singapore International Arbitration Center (SIAC).
SIAC however has halted arbitration proceedings in the Amazon-Future dispute, scheduled between January 5 and 8, until further orders. This follows an order passed by the Division Bench of Delhi High Court which on January 5 stayed the Amazon-Future arbitration proceedings over the appeals filed by Future Retail and its promoters.
The RBI had permitted lenders to enter an OTR scheme with Covid-19 hit companies with a condition that if the company defaults in payments, the account would have to be classified from the date the account would have become NPA if the OTR was not signed.