Future Group puts stake sale plans to Lawson on hold

Friday, 29 June 2012

The Future Group had earlier decided to sell 49 per cent stake in its sourcing and manufacturing operations to Japan’s Lawson Inc. But now it has put on-going talks on hold since it has been able to cut the debt pressure after stake sales in two other units. The sourcing and backend operations were to be spun off from Future’s existing food retail stores into a separate firm. In return for picking up equity in this new entity, the Japanese company was insisting that it be offered the right of first refusal for buying stake in Future’s retail stores as and when India allows overseas supermarket stores to invest in the country’s lucrative retail market. Kishore Biyani did not agree to this condition as the debt burden has come down by Rs 4,600 crore, as a result of these two transactions earlier.

In addition, the group has received Rs 1,250 crores in cash, which it will also use to reduce its debt levels, reducing the group’s overall borrowings to less than Rs 2,000 crores. The Future Group had piled up borrowings of Rs 7,800 crores and the debt pressure forced Biyani to line up 18 units for stake sales including the group’s Future Value Retail that includes Big Bazaar and Food Bazaar chains. Biyani’s view is that he will not sell any stake in the value retailing format, as the debt burden that had clouded the future of his 25-year-old retail-to-financial services firm was now manageable

Now the group is looking at making its flagship firm Pantaloon Retail debt-free by March next year without having to dilute stake in the promising food and value retailing businesses. This became possible after Biyani sold Pantaloon’s controlling stake to Aditya Birla Group through a Rs 800 crores deal.

Lawson, a unit of Japanese conglomerate Mitsubishi Corporation, operates about 10,000 outlets of various retail formats in its home markets and China.

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