Kishore Biyani’s personal debt of Rs 2,000 Crore will be acquired by Reliance Industries (RIL) as part of its deal with Future Group. The enterprise value of the retail assets expected to be acquired by RIL stands at around $3 billion, or Rs 22,700 crore, including the debt to be assumed, said sources. RIL is also likely to acquire up to a 10-15% minority stake in the group’s fast-moving consumer goods (FMCG) business Future Consumer. This is as per a report in the Economic Times.
The report has quoted sources, “While the deal was expected to close last week, issues over the personal debt at promoter holding companies like Future Corporate Resources have to be resolved as the retail business is the main asset (supporting pledged shares),”
Nearly the entire 46% stake held by Biyani and his family in Future Lifestyle is pledged, and about 75% of the 42% stake in Future Retail is also encumbered. The multi-tiered transaction will first involve consolidation of the various Future Group assets under multiple entities like Future Retail and Future Lifestyle Fashions, and then a sale to Reliance. Earlier, a stock transaction was being explored, but the deal is now expected to be a cash transaction, said the sources.
It was reported around the 30th of June that Reliance is nearing a deal to acquire the consolidated retail assets of Future Group.
The discussions come as Fitch downgraded Future Retail’s long-term issuer default rating to C after a missed payment of semi-annual interest on bonds last month. Two Future Group units also missed their payments to Franklin Templeton funds, which are winding up.
Known as the retail king, Biyani has been looking at options, including stake sales in retail units as well as the insurance joint venture Future Generali. In April, Biyani had got an injunction against UBS and IDBI Trusteeship from selling his pledged shares.
According to rating agency ICRA, debt for listed companies of Future Group increased to Rs 12,778 crore as on September 30, 2019 from Rs 10,951 crore as on March 31, 2019.
“A deal may close in a week or 10 days if the issues get resolved,” said the second source familiar with the matter. A potential Future-Reliance combine will consolidate Ambani’s presence as India’s largest retailer and comes as Reliance Retail is looking to bring in strategic and financial investors, which the company had announced at its AGM last month. This, after the record $20-billion fund-raise by Reliance’s telecom unit Jio.
The move to consolidate physical store operations comes even as Reliance has stepped up focus on its e-commerce initiative JioMart, where it has entered into a commercial agreement with messaging app WhatsApp to reach consumers. Last week, Reliance said that JioMart has reached a peak of 400,000 orders a day already, and claimed it is the largest online grocer in the country.
