future group: Lenders of Future Enterprises appoint a forensic auditor

Lenders of Future Enterprises have appointed forensic auditor J C Kabra & Associates, in line with a finance ministry mandate to audit non-performing loan accounts with over Rs 50 crore exposure.

Central Bank of India, the lead bank for Kishore Biyani-promoted Future Enterprises, appointed the forensic auditor on September 12, according to a stock exchange filing by the company late Monday evening.

The troubled retailer, which defaulted on its loans, has outstanding loans of Rs 6,700 crore, said a lender.

The development comes amidst an out-of-court debt restructuring proposal given by the company to lenders, as reported by ET on July 9. However, two trade creditors have filed a petition at the bankruptcy court to admit the company for insolvency proceedings.

National Company Law Tribunal (NCLT) has not yet given its verdict on admitting the company for insolvency.

The forensic audit will evaluate if there is an element of fraud that led to the default in payment to banks. The audit report findings will be critical for the lenders to decide on the resolution of the account. Lenders could consider an out-of-court debt restructuring only if the report gives a clean chit to the promoters.

Several Future Group companies defaulted to lenders after a deal to sell 19 companies to Reliance Industries collapsed in April this year.

One of the group firms, Future Retail is undergoing insolvency proceedings.

Lenders have appointed BDO India to conduct a forensic audit of Future Retail, while stock market regulator Securities and Exchange Board of India (Sebi) has mandated Chokshi & Chokshi to audit Future Retail and related entities for the past three financial years ended March 2020 to March 2022.

Future Group, already over-leveraged, suffered a setback due to the nationwide lockdown announced in 2020 to curb the spread of Covid-19. Most of its hypermarket stores located in malls remained shut for several months.

In August 2020, it signed an agreement to sell its entire business to Reliance Industries’ subsidiaries in a multi-stage transaction, but a series of litigations by ecommerce giant Amazon, claiming violation of shareholder agreement it had with Future Group entities, delayed the deal.

In March, Reliance Industries took possession of the premises housing some 900 Future Retail stores due to non-payment of rentals. In April this year, a majority of secured lenders rejected Future Group’s deal with Reliance Industries.