Future Retail: Debt issues likely to be resolved

Shares of Big Bazzar retail chain operator Future Retail are locked in an upper circuit of 5% at Rs 76.80 on reports of online market giant Amazon considering adding to its investment in the company.
Amazon currently holds an indirect stake of 1.3% in the debt-ridden Indian retailer. It can increase its holdings to as much as 49%.

Under the stock exchange rules, a purchase of more than 25% stake can trigger an open offer.
Amazon had earlier purchased 49% stake in Future Coupons which holds 2.7% stake in future retail. That gave Amazon an effective 1.3% stake in the retailer.

Amazon has an option to acquire Future Coupon’s shares in Future Retail from the third year of the deal. Amazon also became the authorized online sales channel for Future Retail’s stores this year.
The stock has snapped a seven-day losing streak during which it was locked in a 5% lower circuit during each session.
Amazon is considering lining up local investors to join the deal, the people said. Under India’s rules, foreign ownership in the so-called multi-brand retail trading industry — including department stores and supermarkets — is capped at 51%.

Future Retail’s dollar-denominated bonds due in 2025 jumped 8.3 cents on Thursday to about 35.3 cents on the dollar. The move is the largest gain since the bonds were first sold in January.
A change of ownership at Future Retail looms after the Biyani family, founders of Future Group, breached loan terms and came under pressure to sell their assets.
Future Group is considering demerging the food business of Future Retail into a separate entity to make it compliant with India’s foreign direct investment norms
Currently food accounts for more than half the sales of Big Bazaar hypermarkets. Amazon had purchased a 49% stake in Biyani’s Future Coupons, which owns 7.3% of Future Retail, with an option to buy the entire holding at a later stage. That deal gave Amazon roughly 3.6% in India’s largest listed retail entity Future Retail.

In recent months, high debt levels at the holding company level and the crippling blow to its sales dealt by the coronavirus pandemic has prompted Future Retail shares to plunge.
These developments have forced Future Group to explore possibilities including a significant stake dilution in Future Retail and a merger of insurance joint venture Future Generali with bigger, well capitalised players. Co has total debt of Rs 11575 crs as on Sept 2019
Future Retail presently has a presence in 1388 stores, with 16.1 mn sqft across 414 cities and enjoys a 14.9% market share in the foods, groceries and general merchandise catogorioes

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