Kishore Biyani mulls stake sale in Future Retail, insurance biz to offset debt woes

The debts have become unserviceable and some of the lenders are threatening to invoke Biyani's shares.
Kishore Biyani mulls stake sale in Future Retail, insurance biz to offset debt woes
Kishore Biyani mulls stake sale in Future Retail, insurance biz to offset debt woes
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One of the unintended victims of the coronavirus pandemic could be the Future Retail Group’s promoter Kishore Biyani. While the operations in the retail outlets have come to a complete halt due to the lockdown where large format stores have been told to shut down, the company’s market capitalisation has taken a severe hit, falling by over 70% in one month alone. The consequence of all this is that Biyani is now planning to offload his promoters’ quota of stake-holding in the company or alternately bring out a rights issue, as per a report in the Economic Times

The debts have become unserviceable and some of the lenders are threatening to invoke his shares. Already, the IDBI Trusteeship Services has invoked shares pledged to them following the failure to make debt repayment by Future Corporate Resources Private Ltd, the holding company that Kishore Biyani controls. This way, his own holding in the company could come down drastically and he could be unceremoniously eased out of the company.

The present move to find a buyer for the promoters’ equity is to avoid such a situation. Apart from the retail business, which runs the Big Bazaar retail supermarkets across the country, Biyani is trying to find a suitable insurance company to merge his insurance venture with Generali.

Reports indicate that one of the parties he is in discussions with, is Premji Invest, floated by Azim Premji, the founder of Wipro. Biyani has also mandated Aprwood Capital and UBS to help with bringing on board an investor. None of the parties have confirmed these developments.

For the record, the promoters hold close to 50% of the equity in Future Retail of which 52% is pledged with investors.  

The option to raise funds through a rights issue is available but may pose more complications. With liquidity being the constraint, Kishore Biyani may not be able to bring in the funds from his side to subscribe to the rights issue. The other problem is Amazon has made an investment in the business. But Amazon cannot make further investment as per the FDI norms. This will complicate the right issue terms further.

As for the insurance venture, the report says feelers have been sent to SBI Life, but have not been responded to so far.

The situation remains grim for Future Corporate Resources Private Ltd (FCRPL) as it is sitting over debts worth ₹1,045 crore which need to be paid back in the next two years.

The overall figure of debts owed by all the companies of Kishore Biyani or the Future Group put together stands at a staggering ͅ₹12,778 crore! This has prompted the rating agency ICRA to reduce FCRPL to ‘junk’ status.

Following the crash of the stock markets due to the coronavirus scare, the debt to marketcap ratio for Future Group has gone up to 1.3 times from 0.4 times before the slide started.

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