Future Group demerges fashion biz, forms ‘Future Fashion’

After the announcement of demerger plan of its

fashion businesses last week, the stocks of Pantaloon Retail and Future Ventures India are expected to witness a heightened activity this week. According to the plan, all fashion brands currently held by Pantaloon Retail and Future Ventures, will be transferred to Future Fashion, along with a debt of Rs 1,226 crores. Pantaloon Retail shareholders will get one share of Future Fashions for every three held, while Future Ventures shareholders will get two shares of the new entity for every 31 held.

The move by Kishore Biyani, CEO, Future Group comes as the second part of business reorganisation, after selling Pantaloon’s department stores and Future Capital business to Aditya Birla Nuvo and Warbug Pincus, respectively, earlier this year. The newly formed company, which will be subsequently listed on Indian bourses, will, along with Biyani’s other listed entities — Pantaloon Retail and Future Ventures— become the three pillars of the Rs 13,000 crores Group.

The demerger and subsequent listing will take about six-to-eight months. Axis Capital was the adviser to Future Group on the transaction. The Group has also made strategic investments in Biba, AND and Turtle. Current debt on the books of PRIL stands at Rs 3,700 crores, this will come down to Rs 2,474 crores following the Future Fashion move. The latter, on the other hand, will have a total debt of Rs 1,426 crores, which includes Rs 200 crores of existing debt that the fashion business has. FVIL has no debt on its books, carrying cash instead of Rs 300-350 crores.

Through a statement Biyani commented, “This consolidation will help create the base for the next phase of growth of the Future Group in modern retail. We grew multiple formats in the early stages of our growth, and now as each one of them has become sizeable, we are giving them independence to propel their growth.”

PRIL will consist of Big Bazaar, Food Bazaar, Home Town and eZone, among investments in supply chain solutions, sourcing, ecommerce, office supplies, and joint ventures in insurance and textile mills in Mumbai. FVIL, in contrast, will drive the group’s interest in foods and fast-moving consumer goods, including its interest in Capital Foods, the maker of Ching’s Secret noodles.