Rating Rationale Future Corporate Resources Private Limited (Formerly known as Suhani Trading & Investment Consultants Pvt. Ltd.) 25 Jan 2019 Brickwork Ratings reaffirms ratings for the Non-Convertible Debentures Issue of. 425.00 Crores & withdraws the rating of Proposed Non-Convertible Debentures Issue of Rs. 275.00 Crores of Future Corporate Resources Private Limited Particulars Instrument Issue Date Previous ( Crores) Present ( Crores) Coupon Tenure ISIN Particulars Review Rating* (Reaffirmation) BWR A+ (SO) NCD 29-01-18 100.00 100.00 10.25% P.a. 3 Years INE241Z07016 (Pronounced as BWR A Plus) (Outlook:Stable) BWR A+ (SO) NCD 05-02-18 325.00 325.00 10.25% P.a. 3 Years INE241Z07024 (Pronounced as BWR A Plus) (Outlook:Stable) Total 425.00 425.00 INR Four Hundred & Twenty Five Crores Only 1 25 Jan 2019
Instrument Issue Date Previous ( Crores) Present ( Crores) Coupon Tenure ISIN Particulars Review Rating* (Withdrawal) Withdrawal of BWR A+ (SO) Proposed NCD# NA 275.00 NA NA NA NA (Pronounced as BWR A Plus) (Outlook:Stable) Total 275.00 NA INR Two Hundred & Seventy Five Crores Only #Note: The company has requested for withdrawal of rating of proposed NCD of Rs. 275.00 Crores as the same has not been raised. *Please refer to BWR website www.brickworkratings.com/ for definition of the ratings Rating Reaffirmation of NCDs of Rs. 425.00 crores and withdrawal of proposed NCD of Rs. 275.00 crores Rationale/Description of Key Rating Drivers/Rating sensitivities: BWR has essentially relied upon the term sheet outlining the structure of the deal, financial results of Future Retail Limited (FRL) & Future Lifestyle Fashion Limited (FLFL) for the FY16 to FY18, whose shares are pledged and information & clarifications provided by the Company. The reaffirmed rating is primarily a function of total adherence of the issuer to the term sheet shared with Brickwork and enforcement of security, if needed, within specified time-lines indicated in the term sheet. The rating factors, inter alia, the strength of underlying security in the form of pledge of equity shares of FRL, a listed company (Rated BWR AA) & pledge of equity shares of FLFL (Rated BWR A1+), business and financial strength of FRL & FLFL, and availability of sufficient free shares of FRL & FLFL post this transaction, to take care of volatility in share price. However, the rating is constrained by unavailability of assured cash flows of the issuer at redemption, and dependency on the group support, refinance or alternatively divestment of strategic investments before the redemption due date to meet the obligations arising from the NCD issue. 2 25 Jan 2019
The reaffirmed rating essentially captures performance of FRL and FLFL, primarily since the NCD structure involves pledge of FRL and FLFL equity shares provided as security. Stipulated Security cover provides cushion to investors. T-7 clause requiring the Company to deposit all amounts payable under the facility in the designated bank account charged to a debenture trustee at least 7 days prior to maturity date and addresses the liquidity aspects. Failure to which, debenture trustee shall sell the shares. Performance of FRL, FLFL and other promoter companies, and strict adherence to the structure are the key rating sensitivities. Withdrawal of ratings of Proposed NCD of Rs. 275.00 Crores: The company has requested for withdrawal of rating of proposed NCD of Rs. 275.00 Crores as the same has not been raised. NCD Structure The company had earlier proposed to raise this structured NCD of Rs.700 Crs with a tenure of 3 years from the date of disbursement to be used for replacement of high cost debt. Out of the proposed amount of Rs.700 Crs, the company has raised structured NCD worth Rs. 425 Crs. There will be quarterly coupon payment and the NCD shall be redeemed by way of bullet payment at the end of 36 months period commencing from the date of first disbursement. The NCD s are secured by way of pledge of equity shares of FRL and FLFL. Security cover of the pledge shall not be less than 1.50 times (FRL 1.25 times and FLFL 0.25 times) the principal amount at inception. It is an obligation of issuer to maintain security cover of 1.25 times of FRL shares and 0.25 times of FLFL shares at all times. If at any time before the Redemption of the NCDs, the Pledged Equity Shares cover falls below 1.50 times (i.e. minimum security cover) the Issuer/Security Provider shall immediately cause top-up by way of pledge of additional Equity Shares in favor of the Subscriber/Security Trustee or by way of cash top-up so as to restore the shares cover by next working day. If at any time before the Redemption of the NCD, the value of the Pledged Equity Shares as per the share cover exceeds 1.65 times, the Subscriber/Security Trustee irrevocably agrees that the Subscriber/Security Trustee will at the written request of the Issuer release the additional shares within 3 trading days from the date of written request from the Issuer. Issuer shall be required to deposit all amounts outstanding under the Facility in the designated account 7 days prior to the Maturity Date (T-7) and on failure to comply by issuer, Debenture Trustee shall have the right to sell the shares / security created under the pledge agreement before the due date. The NCD has Call and Put options as well. 3 25 Jan 2019
Analytical Approach For arriving at its ratings, BWR has applied its rating methodology as detailed in the Rating Criteria detailed below (hyperlinks provided at the end of this rationale). Rating Outlook: Stable BWR believes the Future Corporate Resources Private Limited business risk profile will be maintained over the medium term. The Stable outlook indicates a low likelihood of rating change over the medium term. The rating outlook may be revised to 'Positive' in case the revenues and profit show sustained improvement. The rating outlook may be revised to 'Negative' if the revenues go down and profit margins show lower than expected figures. About the Company Incorporated in 2007, Future Corporate Resources Private Limited(FCRPL) (formerly known as Suhani Trading and Investment Consultants Pvt. Ltd. (STICPL)) was promoted by Biyani Family of Future Group. FCRPL is mainly engaged in the business of fabric trading, advertisement & print media. Most of the activities of the company are aligned to the Retail Business. Company Financial Performance The company has achieved TOI of Rs. 450.50 Crores in FY18 as compared to Rs. 0.31 Crores in FY17. EBITDA was at Rs. (39.73) Crores in FY18 as compared to Rs. (0.12) Crores in FY17. PAT was at Rs. 4.41 Crores in FY18 as compared to PAT of Rs. (1.31) Crores in FY17. Background of Future Retail Limited (FRL) Future Retail Limited engages in the retail of household and consumer products through departmental store facilities under various formats in India. It operates multiple retail formats in hypermarket, supermarket, and home segments. The company s stores offer food and grocery categories, pre-packed vegetables and fruits, FMCG and daily use products, home improvement products, and consumer durable and electronics products. It operates approximately 901 stores in 240 cities under the brands of Big Bazaar, fbb, Foodhall, easyday, Home Town, and ezone.. Future Retail Limited was incorporated in 1987 and is based in Mumbai, India. Mr. Kishore Biyani is the founder and group CEO and Mr. Rakesh Biyani is Joint Managing Director of the company. Financial Performance of FRL As per financial for FY18, FRL has posted total income of Rs. 18477.97 Crores and EBITDA of Rs. 828.76 Crores against total income of Rs. 17075.09 Crores and EBITDA of Rs. 583.46 4 25 Jan 2019
Crores in FY17. Tangible net worth stood at Rs. 2557.10 Crores in FY18 against Rs. 2085.40 Crores during FY17. Key Financials Indicators of Future Retail Limited Key Financials FRL FY17(A) FY18(A) Operating Income (Rs. Crs) 17075.09 18477.97 Ebitda (In Rs. Crs) 583.46 828.76 Total Debt (Rs. Crs) 1244.1 1286.4 TNW (In Rs. Crs) 2085.4 2557.1 D/E (times) 0.6 0.5 ISCR (times) 2.86 4.73 DSCR (times) 1.69 2.27 Background of Future Lifestyle Fashion Limited (FLFL) Future Lifestyle Fashions Limited (FLFL) is a Listed Public Limited Company. The Company is a part of the Future Group. FLFL is primarily engaged in the business of retail fashion. FLFL houses various brands like Central, Brand Factory, Planet Sports and over 30 other domestic and global fashion brands. FLFL is an integrated Retail Fashion Company, which has its own brands and has investments in various fashion companies like Coverstory, Clarks, Turtle, Giovani, Mother Earth, etc. As on FY17, FLFL has a total store count of 372 with a total Area of 5.4 Million Sq ft spread across 90 cities. Financial Performance of FLFL As per financial for FY18, FLFL has posted total income of Rs. 4497.97 Crores and EBITDA of Rs.430.92 Crores in FY18 against total income of Rs. 3892.84 Crores and EBITDA of Rs. 337.94 Crores in FY17. Tangible net worth stood at Rs. 1499.17 Crores in FY18 against Rs. 1346.83 Crores during FY17. 5 25 Jan 2019
Key Financials Indicators of Future Lifestyle Fashion Limited Key Financials FLFL FY17(A) FY18(A) Operating Income (Rs. Crs) 3892.84 4497.97 Ebitda (In Rs. Crs) 337.94 430.92 Total Debt (Rs. Crs) 681.75 722.50 TNW (In Rs. Crs) 1346.83 1499.17 D/E (times) 0.51 0.48 ISCR (times) 2.74 4.17 DSCR (times) 0.83 1.26 Rating History for the last three years S.No Instrument /Facility Current Rating (2019) Rating History Type (Long Term/ Short Term) ( Crs) Rating FY18 FY17 FY16 1. NCD Long Term 425.00 BWR A+ (SO) (Pronounce d as BWR A Plus) (Outlook: Stable) BWR A+ (SO) (Pronounce d as BWR A Plus) (Outlook: Stable) - - Total 425.00 Four Hundred & Twenty Five Crores Only 6 25 Jan 2019
S.No Instrument /Facility Current Rating (2019) Rating History Type (Long Term/ Short Term) ( Crs) Rating FY18 FY17 FY16 1. Proposed NCD Long Term 275.00 Withdrawal of BWR A+ (SO) (Pronounce d as BWR A Plus) (Outlook: BWR A+ (SO) (Pronounce d as BWR A Plus) (Outlook: Stable) - - Stable) Total 275.00 Two Hundred & Seventy Five Crores Only Key Financial Indicators Key Parameters Units 2018 2017 Result Type Audited Audited Operating Revenue Cr 450.50 0.31 EBITDA Cr -39.73-0.12 PAT Cr 4.41-1.31 Tangible Net worth Cr 2936.00 2921.21 Total Debt/Tangible Net worth Times 2.10 1.67 Current Ratio Times 0.26 0.22 Hyperlink/Reference to applicable Criteria 7 25 Jan 2019
General Criteria Approach to Financial Ratios Analytical Contacts Ravindra Kumar Director-Ratings analyst@brickworkratings.com Media media@brickworkratings.com Relationship Contact bd@brickworkratings.com Phone: 1-860-425-2742 For print and digital media The Rating Rationale is sent to you for the sole purpose of dissemination through your print, digital or electronic media. While it may be used by you acknowledging credit to BWR, please do not change the wordings in the rationale to avoid conveying a meaning different from what was intended by BWR. BWR alone has the sole right of sharing (both direct and indirect) its rationales for consideration or otherwise through any print or electronic or digital media. Note on complexity levels of the rated instrument: BWR complexity levels are meant for educating investors. The BWR complexity levels are available at www.brickworkratings.com/download/complexitylevels.pdf Investors queries can be sent to info@brickworkratings.com. About Brickwork Ratings Brickwork Ratings (BWR), a SEBI registered Credit Rating Agency, accredited by RBI and empaneled by NSIC, offers Bank Loan, NCD, Commercial Paper, MSME ratings and grading services. NABARD has empaneled Brickwork for MFI and NGO grading. BWR is accredited by IREDA & the Ministry of New and Renewable Energy (MNRE), Government of India. Brickwork Ratings has Canara Bank, a leading public sector bank, as its promoter and strategic partner. BWR has its corporate office in Bengaluru and a country-wide presence with its offices in Ahmedabad, Chandigarh, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi along with representatives in 150+ locations. DISCLAIMER Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented as is without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons. 8 25 Jan 2019