Friday, November 01, 2013

Future Retail Ltd: Strong Upmove Expected
CMP: Rs.76.80

The Company has posted a net (loss) of Rs.9.86 Cr for the quarter ended September, 30, 2013, where as the net profit for the quarter ended September 30, 2012 stood at Rs.8.6 Cr. However, inspite of higher other expendicutes, the company could eke out a profit of Rs.13.84 Cr before Finance Cost in Q2FY14 as against Rs.8.79 Cr in Q2FY13. The market has given a thumbs up to such results, which has somewhat beat the market expectations; inspite of disappointing topline of around 5.3% (against expectation of 10-15%).  
Also, the numbers for the September quarter cannot be compared with the year-ago figures due to the demerger of its lifestyle fashion businesses that included Central, Brand Factory and Pantaloons, among other, the first said yesterday.

The total income of th company's largest subsidiary, Future Value Retail Ltd (FVRL)--which operates the Big Bazaar and Food Bazaar chains was up 6.5% in Q2FY14, considering Y-o-Y values.

Positives: Future Retail is in the process of merging its wholly owned subsidiary FVRL with itself and is awaiting regulatory approval, it said. Its stand alone business primarily includes its home and consumer durables retailing business.

During the September quarter, Big Bazaar added a store each in Kolkata, Mumbai, Agartala and Kochi. It also opened eZone in Bangalore, Ahmadabad, Mumbai and Mysore. The company also added HomeTown Express stroes in Hyderabad and Lucknow. 

Reducing Debts: Earlier there were media reports that the Kishore-
Biyani controlled Future Group may sell off more assets from its portfolio of brands and stores in a bid to manage its debt better and undertake further expansion.

Speaking to Express, Future Retail Ltd’s joint managing director Rakesh Biyani said, “After a period of consolidation, we do continue to hold investments for sale purposes. If we get the right market valuations and we feel the need to use the proceeds for debt management as well as expansion, we could consider leveraging our investments”.

Currently, the Future Group has three key retail subsidiaries, Future Retail and Future Lifestyle Fashions (FLFL) and Future Ventures, all of which own the group’s retail ventures as well as joint ventures with international brands.

For instance, Future Retail owns the supply chain, the Big Bazaar, Food Bazaar, the furnishing store Hometown, the electronics chain eZone and Capital First while the listed FLFL owns Central, Planet Sports and brands like Turtle and Celio while Future Ventures owns the foods business, fast moving consumer goods (FMCG) and KB’s Fair Price shops. The group’s debt is approximately Rs 4,500 crore, said Biyani.

Earlier, the company’s chief financial officer C P Toshniwal was quoted in the media as saying that the group would consider offloading a stake in two fashion brands-Celio and Turtle-over the past one year. The group holds a  50% stake in French apparel company Celio while it has 26% stake in menswear brand Turtle.

Recently, Future Group has also sold a stake in Biba and And, two other fashion brands targeted at women, to private equity players. While the Biba sale has been concluded, the And transaction in the last stages, said Biyani.

Future Group has been restructuring itself for the past two years to cut debt and align its businesses.

The company sold its majority stake in Pantaloons format to Aditya Birla Nuvo that brought down its debt by Rs.2,800 crore and got out of non-core businesses like insurance.

“Now is the time to introspect. Future Group is in a period of consolidation as is the industry. When the market improves, retailers will do a much better job on return to shareholders,” added Biyani.

Courtesy: With inputs from Live Mint and The New Indian Epress