April 25, 2022 5:30:28 am
Equity shareholders of Future Retail Ltd are likely to see the value of their shareholding being wiped out if the company is taken to the bankruptcy court for resolution.
This is because once a company is taken to the IBC route, equity shareholders has the last claim over any assets of a company after dues to the government, financial institutions, banks and other creditors and bondholders are paid off. Banks are likely to take Future Retail to the NCLT after they rejected the company’s plan to sell its assets to Reliance Industries Ltd (RIL). According to analysts, Insolvency and Bankruptcy Code (IBC) puts banks and financial institutions at the top of the list before statutory dues. Equity shareholders stay at the bottom and they get whatever is left after banks and bondholders are paid up. In most cases, shareholders don’t get anything, said 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 hold only 14.31 per cent stake in the company. Reliance Industries Ltd on Saturday said the takeover proposal can’t be implemented as secured creditors rejected the RIL plan. On Friday, secured lenders rejected Future Retail’s Rs 24,713 crore deal to sell its assets 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 said in a filing.
Best of Express Premium
As per an exchange filing, in the secured creditors e-voting, 69.29 per cent of votes of 11 lenders were against the proposal to sell the assets to the RIL subsidiary. However, 30.71 per cent of the votes of 34 lenders favoured the sale of assets.
🗞 Subscribe Now: Get Express Premium to access our in-depth reporting, explainers and opinions 🗞️
- The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.