Mumbai: Future Group’s lenders have been spared a $ 2.2 billion impact on their conglomerate exposure after the company announced the sale of all of its businesses to Reliance Industries (RIL) for ₹24,713 crore on Saturday. Publish the agreement Reliance Retail Ventures (RRVL) of Mukesh Ambani will have a 13.14% interest in Future Enterprises Ltd of Kishore Biyani and will assume the debt of ₹12,500 crore.
The lenders led by Axis Bank have a total exposure of ₹16,000 crore for the conglomerate. Analysts believe that haircuts will most likely not be applied to lenders who have lent for business operations. According to data collected by ICICI Securities, the consortium led by the Bank of India has an exposure of ₹5750 crore, Axis Bank has ₹1250 crore and the Bank of Baroda has ₹750 crore.
However, the value of the debt at the developer level ₹Rs 11.9 billion will remain with the promoters, said a person close to Future Group who spoke anonymously. Analysts believe lenders may need to take a hit on this debt, post discussion with lenders next week.
Currently, the Future group is a standard asset on the banks’ books and had taken advantage of the loan repayment moratorium that ends on August 31. An executive director of a public sector bank said that under the original plan discussed with the lenders, there was no haircut involved as Future Group will repay some of the outstanding revenue installments and the rest of the liabilities will be assumed by RIL.
The retail giant had struggled financially since the nationwide shutdown began to damage its businesses, worsening its already strained financial position.
Future Group had a consolidated debt of ₹12,778 million rupees as of September 2019, according to the company’s public records. Its flagship Future Retail had gross debt of ₹2,657 crore as of March 2019.
According to the company, it was originally due to make the interest payment on its 5.60 percent 2025 dollar notes on July 22, which it did not comply with. “Due to the nationwide lockdown imposed to restrict the spread of the COVID-19 pandemic and, consequently, the Company’s restricted business operations, the liquidity position has been affected, which has caused us to lose the payment service of interest due on the USO Notes (listed on the Singapore Stock Exchange) on July 22, 2020. The issuance terms of the USO Notes provide for an additional 30-day period for the payment of interest from of the due date, in case they could not have been paid on the original due date. “the trade notice read.
Future Retail’s 30-day grace period to make the interest payment has ended.
As part of the agreement, the Retail and Wholesale Commitment will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly owned subsidiary of Reliance Retail Ventures (RRVL). The logistics and warehousing company will be transferred to RRVL.
Mint, with its June 11 report, was the first to say that Reliance Retail was in advanced talks to acquire these businesses from the debt-laden Future group.
The agreement is subject to adjustments as set out in the agreement’s compound outline, the statement said.
As part of the acquisition, Future Group will first merge certain companies doing the aforementioned businesses into Future Enterprises Limited (FEL).
Future Group’s retail and wholesale business will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a wholly owned subsidiary of RRVL.
The logistics and warehousing company will be transferred directly to RRVL.
RRFLL also proposes to invest ₹Rs 1,200 crore in the preferred issue of FEL (Future Enterprises Ltd) shares to acquire 6.09% of the shares post-merger and ₹Rs 400 crore in a preferential issue of share warrants which, upon conversion and payment of the balance of 75% of the issue price, will result in RRFLL acquiring plus 7.05% of FEL.
Future Retail’s net earnings decreased to ₹Rs 164.56 crore on a consolidated basis in Q3FY20 of ₹Rs 197.60 crore in the prior year period. Operating income decreased to ₹5,193.19 crore in Q3FY20 compared to ₹5,368.46 crore in the third quarter of 2019.
.
