Two people aware of the ongoing plans of Future Group confirmed this.
According to them, Future Group has held discussions with private equity fund True North, Sunil Munjal-promoted Hero Corporate Services and Wipro founder-chairman Azim Premji-promoted private equity fund PremjiInvest to sell off its promoter holding in the two insurance subsidiaries.
Rajesh Ramaiah, director and chief financial officer at Premji Invest, declined to comment on the matter.
While UBS has been appointed as the merchant banker by Future Group shortlist buyers for the two insurance businesses, Citigroup Global Markets has been hired by Generali to find out potential buyers for Generali's stake in the two entire companies.
Debt-ridden Future Group has two insurance subsidiaries -- Future Generali India Insurance for general insurance business and Future Generali Life Insurance for life insurance.
As an alternative strategy, Future Group has also held talks with State Bank of India for a potential merger of insurance assets of the two Future group insurance companies with SBI's two insurance subsidiaries. Under this plan, businesses of Future Generali Life could be merged with SBI Life Insurance while business of Future Generali India Insurance could be merged with SBI General Insurance. Post the merger, Future Group will sell off its entire stake in the two merged entities to SBI or any other domestic player to get money for repaying a part of its ₹12,000 crore worth of debts.
However, this plan could take much longer than direct stake sales to potential buyers.
“Talks are at an initial stage. The family offices and private equity funds are being asked to acquire the entire Indian promoters' stake in both the insurance businesses. Then only it makes sense because the group debt is large," said the first person.
Future Retail Ltd and Shendra Advisory Services (the two Indian promoters) together own 74.49% stake in Future Generali India, with Generali Participations Netherlands N.V. holding a 25.51% stake in the joint venture. Shendra Advisory Services is an SPV in which around 51% is owned by Future Retail and the rest by Generali. Future Retail effectively holds 51% in Future Generali India while the rest is held by Generali.
In the life insurance business, the Indian promoters include Future Enterprises Ltd. (8.62%), Sprint Advisory Services Pvt. Ltd. (49%) and Industrial Investment Trust Ltd. (16.88%). Sprint Advisory Services is an SPV in which Future Enterprises Ltd. holds over 51% while the rest is owned by Generali. So, through this SPV, Future Enterprises indirectly holds around 25% in Future Generali Life, making Future Group's total effective holding in the insurance company 34%. Generali's effective holding is 49% (direct holding 25.5% and the rest through Sprint Advisory). Industrial Investment Trust is an independent entity.
During fiscal 2020, Future Generali Life earned a first year premium of ₹767.43 crore, which is 7.35% higher than ₹714.9 crore collected during FY19.
Future Generali India Insurance underwrote a gross direct premium of ₹3,417.07 crore for fiscal 2020 compared with ₹2,553.94 crore in FY19.
Biyani has been looking to offload stakes in Future group companies to repay debts but a steep fall in share price of Future group companies since January this year has made things tough. In 2012, Biyani had sold his Pantaloons brand to the Aditya Birla group for ₹1,600 crore. In 2013, Future group had decided to sell its entire stake in Future Generali India to L&T Finance for ₹560 crore but the deal was called off a year later.
The total debts of promoter entities of various Future Group companies rose from ₹11,790 crore in March 2018 to ₹11,970 crore in March 2019.
In April, IDBI Trusteeship Services invoked corporate guarantees on non-convertible debentures (NCDs) amounting to ₹670 crore of Rural Fairprice Wholesale (RFWL), a 100% subsidiary of Future Corporate Resources. Recently, Future Corporate Resources Pvt. Ltd., the main holding company of the Future Group, has been downgraded by rating agencies due to its high debt and weakening financial metrics.
In fiscal 2020, Future Group raised a total of Rs. 4,600 crore, which included selling 6% stake in Future Lifestyle Fashion to Blackstone for Rs1,750 crore. Another ₹1,430 crore was invested by US online retail giant Amazon in Future Coupons Ltd., the promoter entity of Future Retail.