MUMBAI -- Future Group, India's storied but debt-laden retail and consumer goods conglomerate, is in talks with Amazon.com, Reliance Industries and other potential investors over a stake sale that could bring in $1 billion to $2 billion, the Nikkei Asian Review has learned.
Future Group, led by billionaire founder Kishore Biyani, is also negotiating the sale of shares with private equity companies Premji Invest and Samara Capital. Elements of the deal will differ for each investor, a source familiar with the talks told Nikkei, requesting anonymity.
"It is going to be a stake sale, but in which listed entity, what kind of control, etc., will differ," the source said.
Petrochemicals-to-telecommunications conglomerate Reliance would take part in the sale through its Reliance Retail unit.
Premji Invest and Amazon already own stakes in Future Retail, a core business unit of the group. In August, Amazon bought a 49% stake in Future Coupons, one of the shareholders in Future Retail, for 15 billion rupees ($197 million). Through the stake in Future Coupons, Amazon managed to pick up shares in Future Retail and access to country's 1.3 billion consumers.
Future Group, which originated as a stonewashed-fabric seller in the 1980s, has long been a leader in the development of India's modern retail industry. It now serves millions of customers through over 1,500 stores in more than 400 cities.
The current sale may see Biyani's stake substantially reduced in some of the companies, mainly Future Retail, the source said. If this happens, the influence of Biyani -- an industry pioneer once called "the king of modern retail" -- will recede.
"As a policy, we do not comment on media speculation and rumors," said a spokesperson at Reliance. "Our company evaluates various opportunities on an ongoing basis." Future Group did not respond to a request for comment.
N. Chandramouli, CEO of Mumbai-based TRA Research, said the group's debt burden is a cause of worry especially considering market conditions are unlikely to improve significantly over the next 12 months due to the novel coronavirus pandemic, which so far killed more than 12,000 people and infected more than 360,000 in the country.
"With stocks at an ebb, the loans, of which many are against listed stocks, are also under pressure. This [stake] sale will definitely ease the company of a big financial burden, but it may also have Mr. Biyani lose controlling stake in his group."
Future Group has five listed entities: Future Retail, which runs the flagship Big Bazaar multi-format chain; Future Lifestyle Fashion; Future Consumer; Future Enterprises; and Future Supply Chain Solutions. Their combined debt is estimated by rating agency ICRA at about 127.78 billion rupees as of September 30, 2019, up from 109.51 billion rupees at the end of March of the same year.
The group has paused loan repayments to banks, as the Indian government allowed lenders in March to offer a three-month moratorium because of the pandemic, which was later extended for another three months. The group, however, wants to complete the stake sale by the end of the month, the source said.
Future Group's financial troubles stem from issues including borrowing from private equity funds at high rates, pledging of shares by owner Biyani, and hammering of share prices, especially after a nationwide lockdown was instated in March to stop the spread of the coronavirus.
Biyani is in a legal battle with IDBI Trusteeship Services, which invoked pledged shares of Future Retail on behalf of some lenders when shares started to tumble. Future Retail shares have fallen about 70% year to date. IDBI has said it invoked the shares after an event of default.
In recent years, the retail group has been battling competition from up and coming players such as the Aditya Birla Group, Reliance Retail and V-Mart on the brick-and-mortar retail side. On the other side, are e-commerce players such as Walmart-owned Flipkart and Amazon India.
Future Group's attempts to establish a multichannel presence have not really worked out after Biyani previously dismissed e-commerce companies as serious threats.
Chandramouli said Biyani is ambitious, and his businesses are hurt by over-diversification, but he also calls the businessman "a battle-hardened corporate veteran with a pragmatic business view also."
"I am sure he has learned a lot from his past to ensure he gets through this phase," he said.