Future Retail misses debt repayment obligation of Rs 3,495 crore

The Company has missed the last date for payment of Rs 3,494.56 crore to banks and others lenders.

Key points to note –

• The last date for payment was December 31, 2021.
• The due date was as per the One Time Restructuring (OTR) plan approved by the lenders in April 2021 under an RBI announced resolution framework for COVID-19 related stress. There were 28 banks that were part of the exercise.
• Company has attributed the reason for default – ongoing legal dispute with Amazon because of which planned monetisation of assets could not happen i.e., the deal with Reliance. In August 2020, Future group had announced a Rs 24,713 crore deal for the sale of the retail and wholesale business, and the logistics and warehousing business to Reliance Retail Ventures Ltd, a subsidiary of Reliance Industries Ltd.
• The company has review period of 30 days (from the above due date) in terms of the RBI circular dated 6th August, 2020, and further in terms of provision of the above agreement to make the payment. Company informs that it’s in discussions with the banks to resolve the situation within these timelines.

Given the ongoing dispute with Amazon, the default was widely expected. However, I will be surprised if this gets resolved within the allowed time period of next 30 days.

Another interesting point worth noting is – despite financial crunch many of Future Retail’s stores are full with inventory. Besides, the Company continues to advertise widely. There was a lull period in between but over last few months, operations definitely seem to be reviving back. How and from where Company is getting the funding is difficult to comprehend.