FRL shareholders to be hit if banks opt for IBC resolution

Equity shareholders of Future Retail Ltd are doubtless to see the worth of their shareholding being worn out if the company is taken to the chapter courtroom for resolution.

This is as a result of as soon as a company is taken to the IBC route, fairness shareholders has the final declare over any property of a company after dues to the federal government, monetary establishments, banks and different collectors and bondholders are paid off. Banks are doubtless to take Future Retail to the NCLT after they rejected the company’s plan to promote its property to Reliance Industries Ltd (RIL). According to analysts, Insolvency and Bankruptcy Code (IBC) places banks and monetary establishments on the prime of the checklist earlier than statutory dues. Equity shareholders keep on the backside they usually get no matter is left after banks and bondholders are paid up. In most instances, shareholders don’t get something, mentioned an analyst.

Future Retail shares closed at Rs 29.24, down 3.94 per cent, on the BSE on Friday. The company has a market capitalisation of Rs 1,586 crore. Promoters maintain solely 14.31 per cent stake within the company. Reliance Industries Ltd on Saturday mentioned the takeover proposal can’t be carried out as secured collectors rejected the RIL plan. On Friday, secured lenders rejected Future Retail’s Rs 24,713 crore deal to promote its property to Reliance Retail Ventures Ltd, a subsidiary of RIL. “The shareholders and unsecured creditors of FRL have voted in favour of the scheme. But the secured creditors of FRL have voted against the scheme. In view thereof, the subject scheme of arrangement cannot be implemented,” RIL mentioned in a submitting.

As per an trade submitting, within the secured collectors e-voting, 69.29 per cent of votes of 11 lenders have been towards the proposal to promote the property to the RIL subsidiary. However, 30.71 per cent of the votes of 34 lenders favoured the sale of property.

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