Move to reduce pile of Rs 7,800-crore debt

Debt-ridden Pantaloon Retail plans to sell its 22.5 per cent stake in Future Generali Life Insurance to Mumbai-based non-banking finance company Industrial Investment Trust Ltd (IITL).

The valuation at which the stake sale will happen or the deal size has not been disclosed by the company.

After the stake sale, Pantaloon Retail will continue to hold three per cent stake in the life insurer.

Clearing debt

The transaction is subject to approvals from the government and regulatory authorities, including the Competition Commission of India, the Insurance Regulatory Development Authority and the Reserve Bank of India.

With two back-to-back deals last year, Kishore Biyani, promoter of Future Group, managed to get rid of some of his debt (estimated at nearly Rs 7,800 crore). Interest costs on this debt pile were eating into the group’s profits. Biyani sold off majority stake (50.1 per cent) in the Pantaloon department store (part of Pantaloon Retail) to A.V. Birla Group’s Aditya Birla Nuvo for Rs 1,600 crore, with debt of Rs 800 crore also getting transferred.

This was followed by the sale of 40 per cent stake in Future Capital Holdings to US-based private equity firm Warburg Pincus for Rs 420 crore. Another private placement with Bennett, Coleman and Co for Rs 200 crore also helped ease the group’s debt position.

As on December 31, 2012, the company’s total debt was Rs 5,430 crore and its interest outgo for the latest December quarter was Rs 178 crore.

After completion of the transaction, the Future Group consisting of Pantaloon Retail and Sprint Advisory Services Pvt Ltd will continue to hold 52 per cent shares in Future Generali Life Insurance.

Foreign shareholder Participatie Maatschappij Graafschap Holland NV (subsidiary of Assicurazioni Generali S.p.A.) will continue to hold 25.5 per cent stake.

Pantaloon Retail’s shares closed at Rs 184.45, up by 2.9 per cent, on the BSE.

(This article was published on March 8, 2013)
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