Future Group plans more divestments to pare debt: Biyani

Future Retail  has announced fund raising plans of Rs 2,000 crore via a preferential allotment to promoters & investors.

In an interview to CNBC-TV18's Latha Venkatesh and Sonia Shenoy, Kishore Biyani, CEO, Future Group said the group would look at further divestments to pare more debt. It is their aim to bring the group's debt virtually to zero level, he said.

The current debt of the group stands at Rs 6000 crore and the debt-equity ratio stands at 1.6-1.7. Bigyani said they plan to use 75 percent of the amount raised to retire debt and rest towards growth plans.

The merger plans of Future Generali and L&T General Insurance has been dropped said Biyani because according to the Board, the value of the insurance business has gone up significantly than it was earlier.

The group is also seeing a turn around in the same store sales and the growth in April, May, June which has moved up to double-digit high teens.

With the current and further deleveraging plans, Biyani sees the interest costs in the next 18-24 months reducing Rs 25-30 crore from the current Rs 150 crore.

Below is the verbatim transcript of Kishore Biyani's interview with CNBC-TV18's Latha Venkatesh and Sonia Shenoy

Latha: Tell us the purpose of this fund raising. Is it entirely to retire debt?

A: We have mentioned that 75 percent of this money will go towards reducing the debt.

Latha: What is the approximate equity dilution?

A: The plan is to work out the right issue of Rs 1,600 crore and Rs 400 crore of preferential issue. In totality it is around Rs 2,000 crore. Out of this Rs 1,500 crore will go towards retirement of debt and balance will be used for growth purposes.

Sonia: What is the exact debt of the group at this point?

A: The debt would be less than Rs 6,000 crores and we believe there would be a further divestment program which continues which can also fetch us around Rs 2,500 crores over a period of next 18 to 24 months.

We have various stakes in the company; we hold 20 percent of Future Lifestyle Fashion and hold 10 percent of Future Consumer Enterprises. We also have insurance and some other businesses.

Sonia: So is it safe to say that by the end of the next 18 months you could bring down your debt all the way around to even Rs 1,000 crore to Rs 1,500 crores?

A: That is the whole idea. We had announced a year back that we will bring down the debt to virtually a zero level and that is what this whole plan will get us down to.

Latha: This year itself what is your debt equity standing at now and what do you think it will be by the end of the year?

A: The debt equity is close to around 1.6 - 1.7 and we believe going forward it will be very insignificant.

Latha: You spoke about divesting stakes in those other units; is anything on the radar? Have you already been speaking with strategic investors, buyers?

A: We had some restoral stake in our NBFC Capital First which we just sold probably two weeks ago, so there are various deals that will keep happening over a period of time.

Latha: What was the amount for the Capital First deal?

A: That was close to Rs 100 crore.

Latha: Anything on the anvil in insurance or will you wait for the law to allow 49 percent and then look for buyers?

A: It is a journey, a process and regulation also has to be taken into account.

Sonia: You had delayed the merger of Future Generali with L&T General Insurance; any kind of dates that you have in mind on when that process will be resumed?

A: That was not delayed, that was dropped because the whole deal took a little time and the board took a view that the values have gone up significantly and one should look for much better values than the values which was heeded long time back.

Sonia: So will that be taken up at all or has it been dropped indefinitely?

A: We believe our general insurance business is doing very well, it is in profit and over next two years we expect the profit after tax (PAT) should be around Rs 250 crore plus. That is creating significant value for the company.

Latha: Just a couple of questions on the real economy and how things are happening – on the ground, in the malls are you seeing a turning in the corner; are you seeing same store sales growth pick up?

A: April, May, June we have seen a turn around; we are seeing double digit high teens same store sales growth across Big Bazaar. Especially, in June we are seeing same store sales grow significantly across all our formats. We believe there is some momentum which has been set in and we are seeing larger ticket purchases happening in June, which was not so strong in April and May.

Sonia: Because you have this big deleveraging plan to reduce your debt how much of your interest cost could go down to on an average you pay about Rs 150 crores or so going forwards?

A: In the next 18 to 24 months, we expect interest costs to come down to around 25 to 30 crores.

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