Future Retail signs bond deal with Axis Bank
Future Retail, India’s largest modern retailer, has signed a unique bond deal with Axis Bank, from which it raised Rs 300 crore recently. The company will reward the bank for holding the bond till maturity by paying a higher premium on the principal amount.
The company will pay a coupon of 10.10 per cent on the bonds on a quarterly basis. However, the bondholder will receive a premium on the face value of the bonds at the time of maturity, resulting in a higher payout of 10.75 per cent, said officials familiar with the deal.
Future Retail, which is refinancing debt to take advantage of falling interest rates in the country, raised the bonds in two tranches — Rs 120 crore and Rs 180 crore — with tenures of five and six years, respectively. The bonds have put and call options at the end of three years.
Future Retail declined to comment on the deal. In a response to a mail from ET, an Axis Bank spokesperson said, “As a matter of policy, we do not comment on individual client transactions/investments.”
Senior bank officials who did not want to be identified said companies would prefer to enter into such transactions if they expect cash flows to improve after a few years, enabling them to pay more.
Since the bonds were raised to repay high-cost loans, they will not result in any additional debt on the books, said officials from the company who requested anonymity.
Future Retail, the operator of stores such as Big Bazaar, e-Zone and HomeTown, had outstanding debt of about Rs 4,000 crore on revenue of Rs 10,341 crore and net profit of Rs 74 crore in 2014-15.
Earlier this year, the company raised Rs 1,600 crore through a rights issue and used the proceeds to retire high-cost debt. The company has also been swapping its loans with non-convertible debentures, which are raised at rates lower than those paid on loans. Future’s interest burden fell to Rs 135 crore in the quarter ended September fromRs 172 crore a year earlier and Rs 151 crore in the quarter ended June.
In May 2015, the Future Group acquired Bharti Retail in an all-stock deal, valuing the latter at Rs 500 crore.