FRL seeks time on loan dues; independent directors accept Reliance's offer

Retailer asks apex court to direct banks on not labelling it NPA

Future Retail Ltd (FRL) has filed a writ petition in the Supreme Court (SC), requesting it to refrain its (FRL’s) lenders from declaring the company a non-performing asset (NPA) if the retailer did not pay its dues of Rs 3,494 crore by January 29 (Saturday).

FRL had missed its payment date of December 31, after which it had a review period of 30 days to pay the amount to its lenders if it was not to be classified as an NPA.

In its petition to the court, the Kishore Biyani-led company said the respondents (lenders) had agreed to set up an asset sale committee to monetise the retailer’s small format stores (which include Easyday and Heritage Fresh Stores) and recover the dues under the Framework Agreement signed on January 1.

The company has requested the court to direct its lenders to extend the timeline under the Framework Agreement for monetisation and extend the “cure period”/ “review period” (of 30 days) under the agreement. 

On January 11, the court reserved verdict on Future Group’s pleas against a Delhi High Court order declining a stay on an arbitration tribunal decision refusing to interfere with the Emergency Award (EA) of the Singapore International Arbitration Centre (SIAC).

A senior official of a public sector bank that has exposure to Future Retail said: “There is hardly anything to discuss.”

“It is difficult to understand their intentions. The account will become a bad loan (from back-dated, quarter ended June 2021).”

Banks, however, are in better shape to absorb the burden of provisioning. Lenders have been making provisions from the time it became a one-time restructuring (OTR) account in (Q1FY22).

OTR was implemented on April 26, 2021. The overall exposure of the lenders to FRL is about Rs 6,000 crore. The provisioning by the banks will happen by setting aside 25 per cent (Rs 1,500 crore) of the amount.

Lenders have said they would not become party to this matter (going to court). Banks will focus on cash (payments), which seems unlikely to come in the light of the ongoing legal battle.

“It is a legal matter between them (Amazon and FRL). As of now there is no legal communication (for going to the Supreme Court). There is also no clarity on the sale of small format store chain to pay off lenders,” said a banker.

On the other hand, FRL’s independent directors have accepted the transaction with Mukesh Ambani-led energy-to-telecom Reliance group and rejected the proposal of US e-commerce giant Amazon for investment in FRL.

“It helps FRL to meet almost all FRL’s liabilities and in the process helps protect the investment of small shareholders and jobs of over 25,000 employees,” said a letter by FRL’s independent directors dated January 25, 2022, which Business Standard has reviewed.

The letter said it would not serve any purpose engaging in further discussion on the proposal Amazon had made in the letter.

“If you were serious about providing funding to the extent of Rs 3,500 crore within the timeline (in order to repay banks and avoid NPA classification), we would have been happy to engage with you,” said the letter.

“But it is now clear that your letters were just a game of smoke and mirrors, just to serve your purpose of gaining all the media attention and create media headlines that ‘Amazon is prepared to help’,” the letter said.

The independent directors have sent the letter to the Directorate of Enforcement, Securities and Exchange Board of India (Sebi) Chairman Ajay Tyagi, and Competition Commission of India (CCI) Chairman Ashok K Gupta. It has also sent it to top executives at Union Bank of India, Bank of India, State Bank of India, Bank of Baroda, Central Bank of India, Punjab National Bank, UCO Bank, and Indian Bank.

The independent directors had asked Amazon to confirm whether it was willing to fund Rs 3,500 crore by Monday (January 24).

“It is now apparent that you neither were nor are serious about funding FRL …,” the letter said.

Queries to Amazon and Future Group remained unanswered until the time of going to press.