The debt bomb blast has shaken several corporate czars. Kishore Biyani, touted as the king of Indian retail, is planning to sell stakes in non-core businesses to cut debt and raise funds for expansion. Industrialist Tulsi Tantipromoted Suzlon Energy and liquor baron Vijay Mallya-led Kingfisher Airlines are among other firms looking to reduce debt by selling off assets.
The debt of big corporates is estimated to have risen by 50-60 per cent from a year ago, and the most worrisome factor is most of them will not be successful in selling off assets unless they are "distress sales", analysts say. "Future Group is looking to exit completely from Future Generali while retaining a controlling stake in other subsidiaries. So, in other subsidiaries, the group will opt for a minority stake sale. The group is in various stages of discussions with buyers, potential partners and private equity firms," a company source said on condition of anonymity.
Biyani Group is in talks with a couple of insurance firms to sell its stake in Future Generali, a general insurance firm in which it holds 74 per cent stake with Italy's Generali Group having the remaining 26 per cent.
SPECIAL: The Biyani way of dealing with debt
"Apart from the market conditions, Biyani's aggressive build-up of franchisees across the country expecting foreign direct investment (FDI) in retail is one of the main reasons for the debt on books. But he will be able to manage it by selling off some of its noncore businesses like the insurance venture," Deven Choksey, managing director, K.R. Choksey, said.
The group, which has a debt of about Rs 1,800 crore after the recent sales are in taken on books, is also planning to sell a part of its stake in subsidiaries Future Supply Chain Solutions and Hometown. Besides, it is looking for a partner in its electronics retailer, e-Zone, and form a joint entity. Subsequently, it will offload a stake in the joint entity. "For companies with high debt, it is a near-panic situation.
As the market conditions are not conducive, the easiest way will be to sell off assets that do not contribute to the main business of the company," Kishor P. Ostwal, chairman and managing director, CNI Research, said.
Kingfisher Airlines has a debt of Rs 7,000 crore and Mallya hopes to sell stake in Mangalore Chemicals and Fertilisers and UB Holdings among others. According to reports, he also wants to offload stake in sporting teams (F1 and Indian Premier League), and United Holdings among others. "Kingfisher was too much focussed on building a topline and brand expecting the sector to be opened up to foreign investors. The uncertainty over FDI is what has impacted the airline," Choksey added.
Suzlon Energy, with a debt of about $2 billion (Rs 11,000 crore), wants to sell some "non-critical" assets in this financial year to reduce some of its debt. The world's fifth largest wind turbine maker had posted loss of Rs 479 crore in FY12, its third in a row.
Suzlon needs repay $360 million of foreign currency convertible bonds maturing this month and $207 million due in October. It will have to redeem the bonds as their equity conversion prices are way above the current value.
"The companies with debt should succeed in selling noncore assets as there are a lot of cash-rich firms scouting for opportunities. But, pricing would definitely be the issue," Ostwal added.
Courtesy: Mail Today