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Kishore Biyani, chief executive officer of Future Group, has kicked off the second part of his business reorganisation after selling his Pantaloons department stores and Future Capital business to Aditya Birla Nuvo and Warbug Pincus, respectively, earlier this year.
The 51-year-old business tycoon, who is credited with kick-starting a modern trade revolution in India with formats such as Big Bazaar, has decided to hive off his fashion interests into a separate entity. Called Future Fashion, this company, which will be subsequently listed on Indian bourses, will, along with Biyani's other listed entities - Pantaloon Retail (India) Ltd (PRIL) and Future Ventures Ltd (FVIL) - become the three pillars of the Rs 13,000-crore group.
The boards of PRIL and FVIL approved late on Friday night the proposal to demerge the fashion businesses in the two companies into Future Fashion. The demerger and subsequent listing of the latter will take about six-to-eight months. Axis Capital was the adviser to Future Group on the transaction.
Apart from strategic investments in Biba, AND and Turtle, Future Fashion will take up Rs 1,226 crore of debt from PRIL in a move aimed at deleveraging the latter's balance sheet.
Current debt on the books of PRIL stands at Rs 3,700 crore. This will come down to Rs 2,474 crore following the Future Fashion move. The latter, on the other hand, will have a total debt of Rs 1,426 crore, which includes Rs 200 crore of existing debt that the fashion business has.
FVIL has no debt on its books, carrying cash instead of Rs 300-350 crore.
In a statement, Biyani said: "This consolidation will help create the base for the next phase of growth of the Future Group in modern retail. We grew multiple formats in the early stages of our growth, and now as each one of them has become sizeable, we are giving them independence to propel their growth."
PRIL will consist of Big Bazaar, Food Bazaar, Home Town and eZone, among investments in supply chain solutions, sourcing, ecommerce, office supplies, and joint ventures in insurance and textile mills in Mumbai.
FVIL, in contrast, will drive the group's interest in foods and fast-moving consumer goods, including its interest in Capital Foods, the maker of Ching's Secret noodles.
Pankaj Jaju, executive director, investment banking, Axis Capital, admits the current move will help Future in seeking strategic partners and investors for its three individual businesses. He also says the move to streamline operations under the three verticals will help the group in monetising non-core investments.
Future currently is in talks to sell its 74 per cent stake in the two insurance joint ventures it has with the Generali Group of Italy. Biyani had indicated in the past he was keen his group exited insurance, which he saw as non-core.
Future is expected to push the three businesses aggressively once the demerger and listing of Future Fashion are completed. The group is eyeing a turnover of Rs 14,500 crore by the end of the next financial year.