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Biyani strategy to trim debt

Mumbai, June 11: Future Retail Ltd plans to raise up to Rs 2,000 crore through preference shares to promoters and a rights issue.

The funds will be used by the organised retailer to reduce its huge debt and meet growth requirements. Both the proposals were given the green signal by its board of directors at a meeting today.

In a communication to the stock exchanges, the Kishore Biyani-led company said of the Rs 2,000 crore, around Rs 400 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 Rs 130 apiece, totalling Rs 199 crore, on a preferential basis, to Brand Equity Treaties Ltd.

Further, it will issue 76.92 lakh warrants at a price of Rs 130 per warrant, totalling Rs 99 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 Rs 1,600 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 Rs 1.62 crore even as net sales rose to Rs 2,295 crore.

The rights issue was not received well by the stock markets. Concerns of equity dilution saw the Future Retail share ending lower by 7.22 per cent at Rs 135 on the BSE today.

 
 
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