LM: Future group likely to sell in-house brands in bid to repay lenders

2 June 2020: Kishore Biyani’s Future group plans to sell some of its in-house brands as the retail-focused group faces pressure from lenders to reduce debt, two people aware of the development said.

Some of the prominent in-house brands of the cash-strapped group include Cover Story under its apparel retail business Future Lifestyle Fashion Ltd and Tasty Treat under its snacks unit Future Consumer Ltd. The group is planning to unlock value in some of these in-house brands, the people cited above said on condition of anonymity.

“A lot of their in-house brands generate strong revenues and have great brand recall. So these are assets that the group thinks can be leveraged to help it reduce debt of group companies,” one of the two people cited above said, adding that the group is in the process of hiring investment banks to manage the sale of these brands.

In a recent report, credit rating agency Care Ratings also said Future Lifestyle Fashion is exploring various options to tide over debt issues, including selling some of its brands.

“Future Lifestyle has availed moratorium on payments as allowed by RBI, sought additional working capital limits, undertaken initiatives to rationalize costs, including but not limiting to closure of non-profitable stores, migrate from fixed rental model to a revenue sharing one and plans to divest one of its investee brands to augment its cash flows in the near to medium term,” the rating agency said.

An email sent to a spokesperson at Future group remained unanswered.

The plan to sell some in-house brands is part of a larger effort to resolve the group’s balance sheet stress.

The Future group is also seeking buyers for its stake in an insurance joint venture, and several investors have shown interest in the group’s flagship Future Retail, which houses the BigBazaar chain of stores.

Recently, Future Retail said it will raise as much as ₹650 crore by selling non-convertible debentures to replace high-cost debt. The group’s stake in its supply chain business has also been put on the block as part of these efforts.

Biyani’s debt-related woes surfaced in March when shares of his listed firms crashed, triggering a rating downgrade of the promoter holding company and invocation of pledged shares by lenders.

On 4 May, Icra downgraded Future Corporate Resources, a promoter group entity, to D, after it defaulted on coupon payments. “The firms informed it has sought a moratorium on payments from investors; however, the same has not been approved,” Icra said. “Despite monetisation of investments, total group debt has increased as on 31 December 2019…total debt at the group’s listed firms rose to ₹12,778 crore as on 30 September 2019 from ₹10,951 crore as on 31 March 2019.”

Source: LiveMint



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