Billionaire Azim Premji’s Rs 175-crore (Rs 1.75-billion) investment in Future Retail will help Kishore Biyani, chief of the retail major, sail through the coming rights issue of his flagship company and cut debt.
The Rs 1,600-crore (Rs 16 billion) rights issue will open on January 15 and close on January 29.
“Future needs money to cut debt and fund its business. Since retail business is not generating enough cash, tapping external sources is the best way to sustain,” said a banker close to the company. As of September, Future Retail’s debt stood at about Rs 6,000 crore (Rs 60 billion), owing to which the company’s interest outgo is significant.
“Whatever money they have raised from selling Pantaloons to the Birla group has been used to cut debt,” the banker said.
In 2012, Biyani sold his fashion format to Aditya Birla Group for Rs 1,600 crore (Rs 16 billion).
The group also sold its financial services firm Future Capital to private equity major Warbug Pincus, as well as stake in its life insurance venture to IITL. Besides, Biyani has sold stake in Biba and AND fashion brands to various investors.
Calls to Kishore Biyani did not elicit a response. According to reports, Biyani is considering selling his entire stake in Pantaloons, financial services and logistics companies. For Premji, this is the second investment in Future Group. In May, Premji Invest had bought eight per cent in Future Lifestyle Fashions for Rs 125 crore (Rs 1.25 billion).
“Premji must be seeing a bright future in retail and e-commerce going forward,” he said, said A K Prabhakar, an independent analyst.
In the past few months, Premji Invest has invested in online retailer Myntra, Tata group’s retail firm Trent, ethnic apparel and furniture firm Fabindia, retail apparel brand Koutons and apparel store chain Shoppers Stop. It has also invested in preference shares of Tata Capital.