Sebi questions FVRL’s restructuring plans

The Securities and Exchange Board of India (Sebi) has asked for

clarifications from Kishore Biyani-led Future Retail on its intention to merge fully-owned subsidiary Future Value Retail (FVRL) with itself. As per reports, Sebi has raised concerns over the quantum of convertible debt being issued after the merger. It feels that the said deal would not be in the best interests of minority stakeholders of the listed parent company as it would lead to dilution of equity. FVRL has convertible debt of Rs 685 crores, out of which Rs 285 crores has already been bought back by the holding company.

After the company’s merger, the convertible debt of FVRL will be replaced by Future Retail and it will lead to dilution of equity in the parent firm once the debenture holders convert them into shares. Sebi feels this will hurt the minority shareholders of Future Retail.

In October last year, the Board of Future Retail (formerly Pantaloons Retail India) decided that it would merge FVRL with Future Retail in a bid to cut down on costs and streamline operations. Kishore Biyani’s FVRL operates 159 Big Bazaar stores, 28 Food Bazaar stores and several KB’s Fairprice convenience chain of stores.

FVRL reported a profit of Rs 2 crores during the July-September quarter, while its revenue stood at Rs 1,954 crores. These numbers are not comparable to last year due to the company’s restructuring. FVRL’s same-store sales growth stood at 8 percent during the September quarter, while sales growth in the April-June quarter was 10.4 percent.