Mumbai: Aditya Birla Retail Ltd, which operates supermarkets and hypermarkets under the More brand, is looking to refinance debt to the tune of Rs1,500 crore, as it looks to reduce its interest cost, two people aware of the development said.
Aditya Birla Retail’s debt stood at Rs5,936.21 crore as on 31 March 2016, Mint reported on 20 December.
“Aditya Birla Retail has embarked on a debt restructuring drive. It has already tied up close to Rs500 crore through private placement of structured debt instruments with a couple of domestic financial institutions. The overall target is to refinance debt of around Rs1,500 crore, which will be done in multiple tranches," said one of two people, asking not to be identified.
The retail chain has appointed Yes Bank to help refinance the debt, this person added.
“The debt is being raised through debt instruments that allow for one-time repayment at maturity, the so-called ‘bullet payment’, which will also reduce the interest outgo," he said.
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In a December interview, Pranab Barua, business director (retail and apparel) at Aditya Birla Group, said that the company is considering a fundraising exercise to restructure the company’s balance sheet. This could entail taking on a partner or even a possible listing, said Barua.
“We do not comment on market stories," a spokesperson for Aditya Birla Retail said in an email response. “As a matter of policy, we don’t comment on client specific information," said a Yes Bank spokesperson.
Aditya Birla Retail’s debt restructuring exercise will also see the company’s promoters putting some equity capital into the company, said the second person on condition of anonymity
“The company plans to raise equity capital of up to Rs500 crore, primarily from the promoter entities," added this person. According to him, this money too would primarily be used to cut debt.
Promoter entities of Aditya Birla Retail, include Aditya Birla group holding companies Kanistha Finance and Investments Pvt. Ltd and RKN Retail Pvt. Ltd, which collectively own 99.99% of the company.
Aditya Birla Retail operates 487 supermarkets and 19 hypermarkets (stores with area of more than 30,000 sq. ft). The company plans to add at least 30-40 supermarkets to this number next year.
In May 2015, Aditya Birla Retail acquired five loss-making Total Hypermarkets stores from Jubilant Industries Ltd and its material subsidiary Jubilant Agri and Consumer Products Ltd. The Total business had an aggregate retail footprint of 287,000 sq. ft. Aditya Birla Retail’s losses widened to Rs649.42 crore in fiscal 2016 from Rs571.14 crore the previous fiscal, Mint reported 5 December, citing company’s filings with the Registrar of Companies (RoC).
Revenue grew 21.3% to Rs3,509.37 crore from Rs2,893.41 crore the previous year.
Debt also increased to Rs5,936.21 crore in 2015-16 from Rs5,286.36 crore a year ago, according to the company’s filings .
As part of its renewed focus on food and groceries, in October, the retailer hired Mohit Kampani, a former managing director of Spencer’s Retail Ltd, to head the business.
It also plans to increase the contribution from private labels (which are more profitable than other brands) to the revenue from 20% currently to 35-40% in the next three years and is also growing its online business, Mint reported in December.
Another major retail chain Avenue Supermarts, which owns and operates hypermarket and supermarket chain D-Mart, is also looking to raise funds to pare debt and invest in new stores. It is looking to raise up to Rs1,870 crore through an initial public offering, likely to the hit the markets towards the end of February, Mint reported on 20 January.
The promoters of HT Media Ltd, which publishes Mint, and Jubilant Industries are closely related. There are no promoter cross-holdings.