How Kishore Biyani’s Debt Profile Changed

Biyani, the controlling shareholder of Future Retail Ltd., is in breach of terms of loan agreements, Bloomberg reported citing unnamed people aware of the details. The value of the shares offered as collateral has fallen below the required covered as the stock prices of Future Group companies tumbled 49 to 71 percent in the last one month. Investors in bonds issued by two promoter companies took control of 8 percent stake in Future Retail after invoking pledged shares.

Still, Biyani’s debt profile is not like that of Subhash Chandra’s Essel Group and Anil Ambani's Reliance Group firms. That’s because mutual funds have no exposure to Future Group debt. Even banks and non-bank lenders have a relatively smaller exposure as the burden shifted to private equity firms. That’s because the Future Group’s debt profile has changed in the last two years.

According to data disclosed by Future Group companies, promoter firms used proceeds of share and bond sales to private equity investors to repay its borrowings from banks, non-banks and mutual funds.

Shares pledged or offered as collateral against borrowings by the founding family of Future Group increased in the last four quarters as the group debt rose. Lower cash flows forced listed companies to borrow more to repay prior borrowings and to fund capex.

While the full extent of the promoter debt isn’t available, according to an investor presentation in March, the Biyani family has borrowed Rs 2,729 crore against the shares of Future Retail alone. This has a door-to-door maturity of six years, the presentation said without giving details.

Lower Security Cover

The share slide put the spotlight on debt of both the listed and promoter companies. But access to private equity funds meant a lower security cover in terms of shares against loans.

The Future Group pledged relatively less Future Retail shares for the same amount of debt, Fitch said in a note. “This has lowered the number of shares that have been encumbered to securitise the loans, with the private equity loans requiring around 1.2x to 1.3x coverage, compared with 2.0x for the regulated funds.”

That brought down pledged shares between September and December. But the steep slide in stock prices since January again increase pledged shares. More than 90 percent of the promoter holding is pledged in all group companies barring Future Retail’s 57 percent.

The continued fall in share prices means that the total group debt-to-market capitalisation rose threefold to 1.2x as on March 16 compared with 0.4x a year earlier, ICRA said.

Also Read: A Grocery Tycoon Races to Keep India Fed and His Company Afloat

Future Group’s PE Investors

Biyani has been looking to sell assets to pare debt and he used funds raised from private equity investors to retire some of its existing debt. According to disclosures to the Ministry of Corporate Affairs and exchanges:

• Blackstone invested Rs 1,750 crore in Future Lifestyle Fashions through Rs 545 crore to buy 6 percent stake from the promoters and Rs 1,205 crore through zero coupon non-convertible debentures of the holding company.
• Nippon Express invested $50 million as primary equity and $50 million as secondary purchase in Future Supply Chain Solutions.
• AION invested Rs 300 crore in Future Lifestyle Fashions and Amazon invested $200 million for 49 percent stake in Future Coupons Pvt. Ltd.
• In 2019-20, Apollo India Private Equity Fund invested Rs 590 crore in debenture of a promoter company RSCL Trading Pvt LTd.

Emailed queries to Apollo and Blackstone remained unanswered.