Amazon, Carlyle, Brookfield vie for Biyani's Future Supply Chain Solutions

Topics Amazon | Carlyle | Brookfield

The Biyani family holds about 48 per cent in the company and sees this as a non-core area, whose monestisation will help the group in reducing its increasing debt.
Private-equity players including Canadian pension fund Brookfield and US-based Carlyle, e-commerce platform Amazon, and Japanese giant Nippon Express (which already has 22 per cent) have had preliminary discussion on taking a controlling stake in Kishore Biyani-promoted Future Supply Chain Solutions (FSC).

FSC is a third-party supply chain and logistics service provider that offers warehousing facilities also.

According to sources, a listed logistics company is also having a look at the asset.

The company has appointed Ambit, an investment banker, to seek a buyer.

A spokesperson for Ambit did not speak on the matter, and Amazon said it did not comment on speculation. The other three players did not respond to queries. Biyani did not reply, either.

The Biyani family holds about 48 per cent in the company and sees this as a non-core area, whose monestisation will help the group in reducing its increasing debt.

Ratings agency ICRA had downgraded the term loans of the group’s holding company, Future Corporate Resources (FCRPL), in March to non-investment grade on account of its high debt.

Despite monetising investment in group entities, the conglomerate’s debt has increased as of December 31, 2019, as against March 31, 2019, ICRA said in a statement. The debt of the group’s listed companies has increased to Rs 12,778 crore as of September 30, 2019, from Rs 10,951 crore as of March 31, 2019.

This has increased the pledged shareholding of the promoter, resulting in reduced financial flexibility, ICRA added.

The Biyanis have been able to rope in marquee investors like Amazon, which has bought 49 per cent in Future Coupons, the promoter entity of Future Retail. As a result, it also got a minority indirect stake in the retail outfit.

In Future Lifestyle Fashions, the group roped in Blackstone and PremjiInvest. It is also now in the process of selling its stake in Future Retail and reportedly in talks with Reliance Retail, Samara Capita, and Amazon, which could increase its stake in the company. However, Nippon Express acquired equity in FSC at a steep price of Rs 664 a share, but after that the stock price has fallen steeply and is currently hovering at Rs 128.

FSC is a healthy company. In Q3 FY20, profit before tax was Rs 10.94 crore but if exceptional item is taken into consideration it was a loss of Rs 42.17 crore. The exceptional item was due to booking of loss on account of sale of Vulcan Express. In Q3 FY20, it clocked revenues of Rs 283 crore and profit after tax grew by 24 per cent to Rs 11 crore. It had Ebitda (earnings before interest, taxation, depreciation, and amortisation) margins of a comfortable of 23.6 per cent. 

In the same quarter, the company roped in Nippon Express, which acquired a 22 per cent stake and signed a business agreement because both are logistics firms. Nearly 82 per cent of its revenue comes from contract logistics while the rest is from express logistics and temperature-controlled logistics. 

The company has over 8 million square feet of warehouses in the country, and nine temperature-controlled distribution centres, and its express services cater to over 11,400 pin codes.

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