Kishore Biyani Entity Defaults On NCD Payment To Franklin Templeton

A privately held Future Group entity has defaulted on its scheduled debt obligation due to Franklin Templeton Mutual Fund on Aug. 31, two days after the Kishore Biyani-founded group sealed a deal with Reliance Industries Ltd.

Franklin Templeton Mutual Fund had invested in the non-convertible debentures of Rivaaz Trade Ventures Pvt. through four fixed income schemes, according to a statement by the asset manager. Franklin India Short Term Income Plan, Franklin India Dynamic Accrual Fund, Franklin India Income Opportunities Fund, and Franklin India Credit Risk Fund are among the six debt schemes that the fund house shuttered in April citing redemption pressure amid the Covid-19 crisis.

“Due to default in payment, the securities of Rivaaz Trade will be valued at zero basis AMFI standard hair cut matrix. Accordingly, this would be reflected in the NAV (net asset value) movement for Aug. 31, 2020,” the statement said, adding this is the third company after Nufuture Digital (India) Ltd. and Future Ideas Co. that had defaulted on payment obligation resulting in NCDs being valued at zero.

The company has nearly Rs 631 crore of outstanding NCDs, according to Brickworks Ratings, which downgraded the instrument to BWR B+ with negative implications from BWR BB+ on Aug. 19. At that time, Franklin Templeton undertook a 25% haircut to 75%. After the default, it has reduced it to zero. “This valuation only reflects the realisable value on the date of valuation and does not indicate any reduction or write-off of the amount repayable by Rivaaz Trade to the schemes,” the fund house said.

As per July disclosures on Franklin Templeton’s website, the four schemes had a total exposure of Rs 466.2 crore to NCDs of the Future Group entity. It’s not known who are the other investors who have exposure to these NCDs.

BloombergQuint’s emailed queries to Franklin Templeton remained on the extent of latest exposure to the Future Group entity unanswered.

Rivaaz Trade is one of the 11 promoter group entities that are being merged into Future Enterprises Ltd. as part of a three-step deal to transfer Future Group’s retail, wholesale, logistics and warehousing businesses to Reliance Retail at a value of Rs 24,713 crore.

Rivaaz Trade is in the business of leasing of assets like furniture and fixtures, computer peripherals and networking, electrification and electric installation, air conditioning and visual merchandising on the specifications provided by Future Retail. It leases these fixed assets on the basis of a long-term operating lease.

Future Retail—a key customer and majority revenue contributor to the company—saw its sales fall as the lockdown to contain the pandemic shut most of its outlets.

“Based on representations received from the Future Group, we understand NCDs held by Franklin Templeton Mutual Fund are proposed to be repaid from proceeds of the transaction,” according to the statement. “The proposed slump sale and the scheme of restructuring will be subject to regulatory approvals.”