BQ Exclusive: Future Group Approaches Banks For Debt Restructuring

The Kishore Biyani-led Future Group is looking to restructure Rs 7,500 crore in bank loans as various parts of the business face stress. The strains were visible even before the local spread of Covid-19 disrupted businesses across many sectors, including organised retail.

The group had approached bankers for a loan restructuring in March, according to three people familiar with the matter, who spoke on condition of anonymity. The restructuring was sought before a nationwide lockdown was announced by Prime Minister Narendra Modi on March 24.

According to the people quoted above, the group is looking to extend the repayment schedule on Rs 7,500 crore in loans by five years. The group is currently working on a formal resolution plan, which will be submitted to lenders soon.

The consortium of lenders to the group is led by State Bank of India.

SBI and Future Group did not respond to emails sent by BloombergQuint on Wednesday.

Also Read: How Kishore Biyani’s Debt Profile Changed

Apart from debt restructuring, the group is considering monetisation of its non-core businesses such as Future Generali India Insurance, Future Mall Management and the group’s real estate business, said the third person quoted above. This will help in infusing some equity into the group’s retail operations. Future Group is in the process of appointing consultants to help it through the process, this person added.

Future Group, which owns one of India’s largest retail store chains, will also be looking at some operational restructuring as part of the plan. According to the first of the three people quoted above, Future Group will consider cutting down the size of some of its retail outlets, where footfalls have been lower.

Future Group houses brands such as Big Bazaar, Food Bazaar, Brand Factory, FBB, Central, aLL, 7Eleven, Foodhall and Nilgiris, among others.

The complete restructuring plan, including debt and operational restructuring, is likely to be finalised by the end of May, the third person quoted above said.

While the stress across the group has been building for some time, lenders believe it will worsen due to the lockdown, which is keeping customers away from physical stores and hurting sales.

In April, Fitch Ratings downgraded the group’s flagship company Future Retail Ltd (FRL) to B- from BB, citing liquidity concerns after a recent drop in the company’s share price. The drop in share prices had prompted lenders to promoter entity Future Corporate Resources Pvt Ltd (FCRPL) to seek more Future Retail shares as collateral, Fitch noted. The rating agency also said that it is placing the flagship company on rating watch.

“Nearly all of FCRPL 41.1 percent stake in FRL has been pledged to lenders and certain lenders are attempting to invoke pledges on shares that amount to an 8 percent stake in FRL following a breach of the collateral coverage requirement,” Fitch said in a note on April 2.

Future Retail's liquidity position is vulnerable to a prolonged pandemic and a failure to resolve the debt situation at Future Corporate Resources could damage the flagship company's relationships with lenders, compounding the overall liquidity risk, the rating agency said.

Future Retail alone owed Rs 2,657 crore to its lenders as on March 31, 2019, as per the company’s latest annual report. The flagship company reported net profit of Rs 170 crore in the October-December quarter, lower than Rs 201 crore reported a year ago. Total income fell to Rs 5,144 crore in the same period, down 3 percent year-on-year.

Also Read: Bombay High Court Restrains IDBI Trusteeship From Selling Future Retail’s Shares

Watch the full video here: