IndusInd’s sale of Future loans to Edelweiss ARC fails

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A deal between IndusInd Bank and Edelweiss Asset Reconstruction Company (ARC) to sell Future Retail’s loans has fallen through, people familiar with the development said. IndusInd Bank had put a bunch of loans on the block, including to Future Retail, Asian Hotels (North) and some small value exposures.

Edelweiss ARC reportedly backed out of buying the Rs 247 crore corporate exposures as it was unable to complete its due diligence. He was also reluctant to buy exposures included in the pool other than those on Future Retail.

However, Edelweiss ARC bought the small value assets offered by IndusInd Bank. The pool included commercial vehicle and small business loans with a total outstanding amount of around `400 crore, which ARC bought for Rs 285 crore under the 15:85 structure. This means that 15% of the amount was paid in cash while security receipts were issued for the remaining amount.

Emails sent to IndusInd Bank and Edelweiss ARC only elicited responses at press time.

Future Retail is set to go through the process of resolving corporate insolvency as banks rejected a takeover plan proposed by Reliance Retail Ventures. Bank of India has already referred Future Retail to the National Company Law Tribunal. The case has not yet been heard.

The retailer’s accounts slipped into the non-performing asset (NPA) category in January and the 40% provisions taken against it will show up in banks’ financial results in Q4FY22.

Asian Hotels (North) owns the five-star Hyatt Regency hotel in Delhi. The company struggled in FY21 due to the impact of the Covid-19 pandemic on operating performance. According to a Crisil rating report dated November 17, 2021, the liquidity of Asian Hotels (North) was constrained by its negative operating result, and would remain weak in the medium term.

The company had requested a one-time debt restructuring announced by the Reserve Bank of India in its circular dated August 6, 2020, due to the pandemic. The restructuring was implemented in June 2021.

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