Biyani, whose business appeared to be cruising along well, having struck several deals across group companies with the likes of Amazon, private equity firm Blackstone and Japan’s Nippon group in the last six months and whose group raised its first offshore bond in January, has seen his business upended in the last few weeks.
The combined headwinds of debt and Covid-19 panic have led to Future group stocks—Future Enterprises, Future Lifestyle Fashion, Future Retail and Future Supply Chain Solutions, losing 48-68% of their value since the start of the year.
The situation has led to panic among lenders and sent Biyani scurrying to provide more collateral for his pledged shares to soothe his lenders. But the task has not been an easy one so far.
On Tuesday, group company Future Retail said that certain lenders who held NCDs through IDBI Trusteeship Services Ltd have invoked promoter pledged shares worth 8%. In a stock exchange filing, IDBI Trusteeship said that it had invoked the shares since an event of default has occurred.
The move came after rating agency Icra on Friday downgraded Future Corporate Resources Pvt. Ltd, a promoter entity, to junk rating of BB+ from its previous rating of BBB- (ratings below BBB- are considered below investment grade). The downgrade, the agency said, was on account of high group level debt and falling stock prices which were bound to put pressure on promoter pledges.
“Despite monetization of investments across various Group entities, the total Group debt has increased as on 31 December 2019, as against 31 March 2019. Icra notes the increase in debt is mainly on account of an increase in debt of the opcos, with the total debt at the Group’s listed companies increased to ₹12,778 crore as on 30 September 2019 from ₹10,951 crore as on March 31, 2019," the rating agency said.
The group is making several efforts to bring in capital to tide over its debt issues.
Key among these is an attempt to sell the entire business of Future Lifestyle Fashions Ltd, two people familiar with the development said on condition of anonymity.
“The situation is tough and Future needs money. Retail sales are already slackened due to a slowdown because of the virus outbreak. Buyers are there for Future Lifestyle because the business is readymade and running but one has to be flexible with the valuation. If the stock fall due to the bad market condition is controlled, a valuation of up to ₹6,000 crore looks comfortable," said the first person.
Future Lifestyle sale mandate was given to Arpwood Capital last week. The money from the sale proceeds is to be used primarily to repay debts of Future Group, said the first person.
An Arpwood spokesperson declined to comment on the matter. Emails sent to the Future group did not elicit a response.
Future group promoters are also trying to raise fresh capital at the promoter level, through a combination of equity and structured debt, said another person, also speaking on condition of anonymity.
“The promoters are engaged in talks with various investors to raise money. They would need an infusion of around ₹1,000-1,500 crore in the near term," he said.
The fact that state governments across the country are effecting lockdowns in major cities and districts is also not helping the promoters’ cause, he added.
With most state governments asking all non-essential business activities to shut down, Future group stores, especially the apparel business under Future Lifestyle Fashion has been almost entirely closed and several retail stores of Future Retail are operating only their grocery sections. This is expected to reduce the operating revenues of these companies, further compounding the problem for Biyani.
To be sure, Biyani is not new to these troubles.
Future group was caught in a debt trap when India’s economic growth started slowing down in 2010.
That episode saw Biyani sell his apparel store business Pantaloons to Aditya Birla group and his financial services business Future Capital to Warburg Pincus.