SSG Capital to invest Rs 580 crores in Future Supply Chain

Future Retail (FRL) informed stock exchanges on Thursday that private equity firm SSG Capital Management Group is investing upto Rs 580 crores to acquire 40 per cent stake in Future Supply Chain Solutions (FSC) from the existing shareholders of the company. The deal is at a valuation of Rs 1,450 crores. This will include 14 per cent stake to be acquired from Future Retail Ltd (FRL) and the management team collectively, and 26 per cent from another minority shareholder SKC 1 Limited (SKC).

FSC was incorporated in April 2007 and is promoted by FRL. It is India’s first fully integrated and IT enabled end to end Supply Chain and Logistics company with capabilities in handling Modern Warehousing, Express Logistics, Cold Chain and E Commerce Logistics. FSC caters to distinct requirements of categories including Food & Beverages, Apparel, Lifestyle, Consumer Electronics & High Tech, Automotive & Engineering, Home & Furniture, Healthcare, General Merchandise and E Commerce.

Commenting on the proposed transaction, Mr. Kishore Biyani, MD, Future Retail said, “We are excited about this transaction including our partnership with SSG. It is a step towards our stated intent of optimal monetisation of some of the investments held by FRL. FRL has followed a multi-pronged approach for strengthening its balance sheet and this partial monetisation of its stake in FSC is a step in this direction. It will result in estimated proceeds of upto Rs 185 crores for FRL’s stake. Given that the supply chain arm is of critical importance for furtherance of Future Retail’s overall business objectives, FRL will continue to a hold majority stake of 57.4 per cent in FSC.” 

On financial front, during the year ended March 31, 2015, FSC registered income from operations amounting to Rs 408 crores and earned a net profit of Rs 25 crores. FRL currently holds 70.17 per cent equity stake in FSC, with SKC holding 26 per cent and the remaining mainly held by the management team.

Future Retail’s revenue increased by 25.27 per cent to Rs 3326 crore in Q3FY16 as compared to same period in the previous financial year. The company’s EBITDA declined by 1.94 per cent to Rs 303 crore in Q3FY16 on a yearly basis. Its bottom line boosted almost three times to Rs 14.68 crore in Q3FY16 as compared to same period in previous fiscal year. Future Retail’s Net Profit margin expanded by 24 basis points to 0.44 per cent in Q3FY16 on a yearly basis.

Future Retail also informed stock exchanges on Wednesday that it is acquiring Fabfurnish brand in ecommerce space. The objective is to diversify business into furniture and home furnishing. The company bought BEPL through cash transaction. It purchased equity stakes at Rs 4.86 per share.

On valuation front, the stock of company is trading at trailing twelve month (TTM) P/E of 122.67 compared to industry P/E of 48.93. The stock of company is trading at Rs 134.25, an increase of 4.23 per cent from the previous close.