Lenders in talks to sell Rs 18,850-cr Future group loans to NARCL

According to a banking source close to the development, the loans are expected to be sold in the second half of the current financial year

Lenders to the Future group are in talks with the newly formed National Asset Reconstruction Company (NARCL) to sell loans worth Rs 18,850 crore. This comes at a time when Future group firms are facing bankruptcy proceedings in the National Company Law Tribunal (NCLT), Mumbai, and a forensic audit has been ordered by the market regulator.

A banking source close to the development said the loans are expected to be sold in the second half of the current financial year. “Banks are planning to sell loans worth Rs 10,700 crore of Future Retail and Rs 5,800 crore of Future Enterprises, among other loans. A final decision by NARCL will be taken on the quantum of loans,” said the source.

Future group companies were sent to the bankruptcy court after the group failed to close a transaction with Reliance Industries, announced in August 2020. 

The deal collapsed after American retail giant Amazon decided to challenge it in the Singapore arbitration court as well as Indian courts. In February, Reliance Retail took over 947 stores belonging to Future Retail, saying these were sub-leased to Future.

According to the latest plan, banks will receive 15 per cent of the asset value in upfront cash from NARCL and the rest in security receipts issued by the new entity. The receipts are redeemable and are tradable among investors. The government has decided to provide a guarantee of up to Rs 30,600 crore, to be issued by NARCL to back the instruments.

The guarantee will be valid for five years and will cover the shortfall between the face value of the security receipt and the actual realisation. The government hopes that its guarantee will also enhance the liquidity of security receipts and attract foreign investors. Once the loans are acquired by NARCL, another company — India Debt Resolution Company — will manage the assets to help turn around the company.

Government-owned financial entities will hold up to 49 per cent in the turnaround company while the rest of the equity will be held by the private sector lenders.