Kishore Biyani led Future Group companies, faced investor ire in recent times following the rumours about burgeoning debts which is not only causing erosion in groups value but makes it vulnerable for hostile takeover.
Given the high level of pledges, which could create a vicious cycle of lower prices, particularly in the event of a market selloff, and ratings downgrade limit fundraising option.
About 83.9% of promoter holdings in Future Retail, 92% in Future Consumer, 92.3% in Future Enterprise, 99.8% in Future Lifestyle Fashions were pledged as per latest filings.
Biyani has initiated talks with investors including Premji Invest to sell a large chunk of the promoter stake in Future Retail (FRL) to tide over his liquidity crisis.
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 unlikely to generate funds for his contribution in the proposed rights issue, and his stake in FRL will subsequently reduce, if the rights issue happens.
Debt repayment default, earlier this week, by Future Corporate Resources (FCRPL) resulted in IDBI Trusteeship Services invoking pledged shares in Future Retail.
Due 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.
As of March 2019, total debt for the four major promoter holding companies was Rs 11,970 crore (USD 1.58bn).
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.
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.
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