Future Retail looks to raise Rs2,000 cr through preferential issue

The Kishore Biyani-led Future Retail has announced plans to raise Rs2,000 crore through a preferential allotment to promoters and investors.

In an interview on CNBC-TV18, Biyani said the group would continue to look at further divestments to pare debt. It is their aim to bring the group's debt to virtually zero, he said.

The current debt of the group stands at Rs6,000 crore; and the debt-equity ratio stands at 1.6-1.7.

Biyani said the company plans to use 75 per cent of the amount raised to retire debt and rest towards growth plans.

He further said the merger plans of Future General with L&T General Insurance have been dropped because according to the Future board, the value of the insurance business has gone up significantly than it was earlier.

The group is also seeing a turn-around in same-store sales and the growth in April, May, June has moved up to double-digit high teens.

With the current and further deleveraging plans, Biyani sees the interest costs in the next 18-24 months reducing Rs25-30 crore from the current Rs150 crore.

In a communication to the stock exchanges, the company said of the Rs2,000 crore, around Rs400 crore will be raised through the issue of shares or warrants on a preferential basis to investors and promoters; the rest will come from a rights issue.

The company plans to issue a little over 1.53 crore shares at a price of Rs130 apiece, totalling Rs199 crore, on a preferential basis, to Brand Equity Treaties Ltd.

Further, it will issue 76.92 lakh warrants at a price of Rs130 per warrant, totalling Rs99 crore, to Future Corporate Resources, a promoter group entity. Holders of these warrants can also acquire the same number of shares.

Future Retail will hold an extraordinary general meeting to seek shareholders' approval for the preferential issue.

The company also plans to issue shares carrying differential voting rights (DVRs) up to Rs1,600 crore to its existing shareholders on a rights basis.

At present, promoters own 48.36 per cent in the company, foreign institutional investors hold 20.85 per cent, domestic institutions 8.40 per cent and other minority shareholders 22.39 per cent.

Heavy debt at around Rs 5,500 crore and the resulting interest outgo has impacted the bottomline of Future Retail. For the quarter ended March 2014, the company had to shell out Rs 155.25 crore in interest, resulting in net profits falling to Rs1.62 crore even as net sales rose to Rs2,295 crore.