Future Group firm to raise Rs 134 cr from IFC

Company plans to invest Rs 400 crore and port of it will be funded by Black River Asset Management also

Future Consumer Enterprise Limited (FCEL) is planning to raise around Rs 134 crore from the World Bank’s investment arm to help drive the food processing company’s Rs 400 crore investment plan in various parts of the country and in neighbouring Sri Lanka.

The International Finance Corporation (IFC), a World Bank affiliate, said it is planning to invest Rs 134 crore in FCEL — a part of Kishore Biyani’s Future Group — in the form of compulsorily convertible debentures (CCDs) and common shares to partly finance a Rs 400 crore project. Another key investor, Black River Asset Management LLC, will finance around 50 per cent of the project.

FCEL is an integrated food processing company with agricultural commodities sourcing, processing as well as development and manufacturing of value-added products for its fast-moving consumer goods (FMCG). It is a listed entity.

FCEL plans to undertake a capital expansion programme for investments to develop new products for its FMCG brands, expansion of its sourcing operations, further development of a 114-acre integrated food park in partnership with the ministry of food processing industries in Karnataka and development of manufacturing and processing operations for dairy products, fruits and vegetables, oats and sauces and ketchups (project).

All facilities in the project are existing ones. The integrated food park is located in the Tumkur region of Karnataka, Nilgiris Dairy farm is located in the town of Erode, Tamil Nadu, and the Aussee Oat Milling in Mirigama, Sri Lanka. A small portion of the investment will be allocated for the Lankan operations.

Biyani, the founder of Future Group — it comprises various entities in retail and associated businesses including FCEL, Future Retail Limited (FRL) and Future Lifestyle Fashions Limited — and his various intermediate investment entities (sponsor) control 33.7 per cent stakes of FCEL, while FRL owns 9.9 per cent.

Other key institutional investors include Arisaig Partners Asia (Pte) Ltd (9.2 per cent ownership), Verlinvest S.A. (6.5 per cent ownership), and Bennett Coleman & Co. Ltd. (6.4 per cent ownership).

IFC said that for FCEL, the former is a strategic partner and its key addition is in being able to provide the entire range of products and services to meet FCEL’s long-term financing, growth, sustainability and strategic requirements. IFC will also engage with the company on food safety advisory starting with an assessment of areas of improvement in food safety by IFC’s advisory team.

The project would benefit from IFC’s long-term risk capital, which is required for fast-growing companies like FCEL that are just turning profitable and are still in the early stage of their development.