Future Retail to buy group co's infrastructure assets in Rs 4,000-cr deal

Kishore Biyani, Founder & CEO, Future Group
The retail arm of the Kishore Biyani-led Future Group will buy the infrastructure assets of Future Enterprises for up to Rs 4,000 crore, it said on Saturday. The announcement comes at a time when e-commerce giant Amazon is seeking approval of the Competition Commission of India (CCI) for its Rs 1,500-crore transaction with Future Coupons, a Future Retail promoter entity.

In its board meeting on Saturday, Future Retail said the management had given in-principle approval for the acquisition of the assets, adding it would be done in one or more tranches and after getting an independent valuation report.

Future Enterprises develops, owns and leases the retail infrastructure for the group. The company also holds the group’s investments in subsidiaries and joint ventures including insurance, textile, manufacturing, supply chain, and logistics.

 
Sector analysts said the deal would help bring down debt on the books of Future Enterprises, which at the end of FY19 stood at Rs 6,717 crore. This is a year-on-year increase of 15 per cent, the data from its financial results show.

In the past one year, the stock price of Future Enterprises has fallen about 18 per cent to Rs 20 a share.

“The Future Group is also simplifying its structure,” said Abneesh Roy, executive vice-president, research, institutional equities, Edelweiss. “So far, retail assets sat in Future Enterprises, not Future Retail. Now the retail assets will sit in Future Retail. This is a step in the right direction,” he said.

As of Friday, the market capitalisation (m-cap) of Future Enterprises stood at Rs 1,023 crore, a 3 per cent increase over the previous day. The company closed FY19 with consolidated sales of Rs 6,173 crore and a consolidated net profit of Rs 145 crore.

Last month, Japan’s largest logistics company, Nippon Express, bought 22 per cent in Future Enterprises’ subsidiary Future Supply Chain for Rs 646 crore. This was done through a primary issuance of shares as well as a secondary share purchase. Future Retail, which operates large and small format retail chains including Big Bazaar, fbb, Foodhall, EasyDay and Heritage Fresh, will soon open convenience stores under the 7-Eleven brand in Mumbai. The latter is Japanese-owned, but a US-headquartered company, with a presence across the globe. 

Future Retail said on Saturday it would fund the acquisition of retail assets through existing channels available to it, including equity and debt. It would not raise fresh funds for the deal.

The company also said approval of its members would be sought at an extraordinary general meeting, to be held in Mumbai on November 8.


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