Icra downgrades ratings of Future group holding company over debt pile-up

ICRA has downgraded the rating for term loans of Future Group’s holding company Future Corporate Resources (FCRPL) to non-investment grade on high debt levels of the Kishore Biyani-led group.
 
The rating was lowered from “BBB” to “BB+” and factors in a substantial increase in the pledged shareholding of the promoter across listed entities owing to a continued decline in share prices.
 
FCRPL’s external debt reduced to Rs 1,430 crore (excluding the impact of Ind-AS) as of December 31, 2019, from Rs 2,758 crore (excluding the impact of Ind-AS) as of March 31, 2019. Yet, the debt (including debt from group companies) remains high.

 

Furthermore, despite monetisation of investments across various group entities, the total group debt has increased as of December 31, 2019, as against March 31, 2019, ICRA said in a statement.
 
The situation is mainly on account of an increase in debt of the operating companies, with the total debt at the group’s listed companies increasing to Rs 12,778 crore as of September 30, 2019, from Rs 10,951 crore as of March 31, 2019.
 
With continued reduction in the share price of Future Group’s listed entities, the group’s debt to market capitalisation ratio has increased to 1.2 times as of March 16, 2020, from 0.4 times as of March 31, 2019.

 
Furthermore, this has resulted in an increase in the pledged shareholding of the promoter, resulting in reduced financial flexibility, the rating agency said.
 
However, the group also has investments in several unlisted entities, which provides an opportunity to monetise investments.
 
Future Group has received investments from marquee investors such as Amazon and Blackstone. But its ability to timely monetise its investments, reduce the debt at the holding companies as well as operating companies and achieve reduction in the pledge levels across various listed entities is a key rating sensitivity.
 
FCRPL’s debt servicing is solely dependent on its ability to monetise its investments and/or timely refinance its debt because of insufficient accruals from its operating business, it said.