BackFuture Retail to raise Rs2,000 cr through preferential, rights issue
`200 crore to come from a preferential issue, `200 crore through issue of warrants and `1,600 crore through a rights issue
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Mumbai: Kishore Biyani-led Future Retail Ltd sought its board’s approval on Wednesday to raise up to ₹ 2,000 crore through a preferential issue of shares and warrants, mainly to reduce debt.
Of the ₹ 2,000 crore, ₹ 200 crore will come from preferential stock issue to Brand Equity Treaties Ltd. Another ₹ 200 crore will be raised through issue of warrants to Future Corporate Resources Ltd, a promoter company. The bulk of the money— ₹ 1,600 crore—will be raised through a rights issue.
“The money should come in by end of September as we are still awaiting necessary approvals," said a Future group spokesperson, explaining that 75% of the raised money would be used for debt repayment and the remaining for expanding the high-margin fashion business.
In the 15 months ended 31 March, Future Retail’s total debt stood at about ₹ 6,000 crore.
“This is one of the options and the fastest way to deleverage the balance sheet. They will also have to sell assets to reduce the debt but that will take time," said Abhishek Ranganathan, vice-president, PhillipCapital India Pvt Ltd.
For the quarter ended 31 March, the retailer which operates chains like Big Bazaar and Food Bazaar, had interest costs accounting for 98% of its Ebit (earnings before interest and taxes), said Abneesh Roy, associate director, Edelweiss Securities Ltd on 4 June, adding that the sustained high debt was a huge concern for the company.
For the quarter ending March, the company reported a positive net profit after four quarters, amounting to ₹ 1.6 crore on revenues of ₹ 2,345 crore.
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