Future Group stocks rally on report Co may merge subsidiaries; RIL adds 1%

Once the merger is complete, Reliance Industries will be investing Rs 8,500 crore in the merged entity, resulting in the Mukesh Ambani-led conglomerate owning close to 50 per cent in it

Future Group stocks such as Future Enterprises and Future Lifestyle were trading higher on Friday after a Business Standard report said that the board of Future Enterprises is likely to discuss on Saturday the proposal to merge other listed group entities with itself.

"Once the process is complete, Reliance Industries (RIL) will be investing Rs 8,500 crore in the merged entity by way of additional capital, resulting in the Mukesh Ambani-led conglomerate owning close to 50 per cent in it... The funds infused by Reliance will be used to repay the lenders," the report said. READ HERE

At the end of June 2020 quarter, the promoter group held 50.11 per cent in the company, while public shareholders held 49.89 per cent.

The stake of US-based online retail giant Amazon, which holds 9.9 per cent in Future Retail, will also get diluted in the merger process. According to a banking source, Amazon has climbed down from its earlier position as a loan default by Future is imminent.

On August 19, CARE Rating revised the company's Long-term-Term loan rating from CARE BB to CARE C. Besides, it revised rating on Non-Convertible Debenture Issue from CARE BB to CARE D, and on Fixed Deposit Programme from CARE BB to CARE C.

"The revision of ratings assigned to the bank facilities and instruments of Future Enterprises Limited is on account of delay in servicing of its interest due on August 17, 2020 on its Non-convertible Debentures. The default is primarily on account of poor liquidity position due to subsequent lockdowns in the wake of Covid-19 outbreak. Consequently, the ratings for other facilities and instruments have also been revised and removed from credit watch," the agency said in ita rating rationale. READ HERE

Individually, Future Enterprises rallied 5 per cent in the intra-day trade to hit a high of Rs 17.65 per share. A combined 2.3 million shares had changed hands on the counter on thw NSE and BSE till the time of writing of this report. 

That apart, Future Retail gained around 7 per cent, and Future Lifestyle Fashions and Future Market Networks gained 5 per cent each. Future Consumer added 2.8 per cent in the intra-day trade.

Shares of Reliance Industries were trading 0.5 per cent higher at Rs 2,106.95 per share at 9:55 am. It hit an intra-day high of Rs 2,119.8 per share, up 1.1 per cent. In comparison, the benchmark S&P BSE Sensex was ruling 0.78 per cent higher.

On August 4, Business Standard reported that RIL is giving final touches to the acquisition of Future Retail (FRL). "The lenders, who have pledged on the majority of Future Group promoter Kishore Biyani’s stake of 41.73 per cent in FRL and in other companies, plan to convert a part of Biyani’s loans into equity, so that they receive shares in Reliance Retail, said the source. The promoter entities of Biyani have a debt of Rs 12,778 crore as on September last year and were finding it difficult to service its dues, leading to its sale," the report said. READ HERE