MUMBAI: Debt at the holding company level, plunging share price of listed entities, and crashing sales due to the Corona virus scare, have forced Future Group founder Kishore Biyani to explore a significant stake dilution in Future Retail and a merger of insurance joint venture Future Generali with bigger, well capitalised players.Earlier this week, Future Corporate Resources Private Ltd, Biyani's holding company, defaulted on it debt payments. This resulted in IDBI Trusteeship Services invoking pledged shares in Future Retail, causing Biyani's shareholding to falling by 8%. If his deals doesn't fructify or existing investors fail to support, Biyani could lose control of his flagship retail firm that runs Big Bazaar supermarkets.Biyani is in talks with investors including Premji Invest to sell a large chunk of the promoter stake in Future Retail Limited (FRL) to tide over his liquidity crisis. As an alternative, a rights issue at FRL is also being considered where all shareholders can participate. While Amazon is one of the shareholders, regulations restricts the American online company to invest further, a factor that can delay the process, said two people privy to the talks. The quantum of the rights issue is yet to finalised.But sources said, it is unlikely that Biyani will be able to generate funds for his contribution in the proposed rights issue, and his stake in FRL will subsequently reduce, if the rights issue happens. As on January, regulatory filings show, promoters own 49.51 per cent of FRL, 52.28 per cent of which are pledged. 74838841 Future Group has also mandated Aprwood Capital and UBS to help bring on investors on board and help in develeraging the balance sheet. Mails sent to PremjiInvest and Future Group did not elicit a response.The group is also looking at merging its insurance joint venture and is also believed to have sent feelers to SBI Life, but this could not be confirmed independently. Mails sent to SBI Life also did not generate a response.In addition to the recent default, lenders have threatened to invoke additional shares of Biyani's holding company due to consistent decline in the share price of Future Retail, the listed entity. FCRPL has debt repayment obligations of Rs 1045 crore for the next two years. FCRPL’s prospects are linked to the fortunes of group companies like Future Retail or Future Lifestyle Fashions that provide financial support primarily through dividends and also loans and advances. Last week, FRCPL was was downgraded by rating firm, ICRA, to junk status due to the high debt of its promoter entities. The group's total debt including remained high at Rs 12778 crore for all his listed companies, it said. Two weeks ago, Fitch Ratings released a report that said additional burden to secure debt at the promoter level could trigger a change of ownership if they default on FRL's recent $500 million bond issue. The group is also looking at merging its insurance joint venture and is also believed to have sent feelers to SBI Life, but this could not be confirmed independently. Mails sent to SBI Life also did not generate a response.With share prices of Future Group listed firms cos falling by over 70% in the last one month, the total group debt to market capitalisation has increased to 1.3 times compared to 0.4 times a year ago. After the coronavirus outbreak, most retail firms are not generating enough cash flow to run basic operations which also have high fixed cost. "There will be zero cash flow, possibly for another month, putting further pressure on the share price. Biyani will have to either pledge more shares at low value to meet the lender's requirements or pay the difference between value of shares when it was pledged and the current market price," said a person aware of the situation.Future Retail, which runs more than 1,388 stores, controls about 15% of India’s organised food and grocery market through the Big Bazaar and Nilgiris supermarket chains.
from Economic Times https://ift.tt/39hM7Vr
No comments:
Post a Comment