The lenders, who have a pledge over majority of Future promoter Kishore Biyani’s stake 41.73 per cent in FRL, have finalised a plan under which banks will convert part of Biyani’s loans into equity and receive shares in Reliance Retail Ltd, say sources. As per a banker, the deal, worth Rs 27,000 crore (including debt), will include Future’s logistics and apparel companies also.
On Monday, IIFL Securities had said it is valuing R-Retail at 35 times of FY22 Ebitda, at an enterprise value of a massive $57 billion. The multiple has been raised from 25 times, to account for Reliance Retail’s strong performance in the grocery segment. In the base case, IIFL valued RIL at market cap of $184 billion, which is based on oil to chemical’s valuation of $63 billion; Jio at $73 billion and R-Retail at EV of $57 billion. The RIL stock closed at Rs 2,151 a share.
Industry sources said there was immense pressure of Biyani to sign on a deal after Future Retail defaulted on interest payments of Rs 100 crore on July 22. The default led to S&P Global Ratings warning that it would downgrade the retail firm to default category after 30 days because the company faced liquidity pressure, depressed operating cash flow and delays in disbursement.
“Even if Future Retail makes the coupon payment within the grace period, its weak liquidity will remain an overarching credit risk,” it said.
The promoters of Future had promised to sell their stakes in two insurance ventures or merge it with SBI General so that it can pay off its lenders. The promoters had debt worth Rs 12,000 crore on their books and in spite of selling assets in the last few years, failed to meet their financial commitments.