Future Group will continue to offload stake in its non-core businesses in order to raise around Rs 3,000 crore. The Group has announced a deal wherein it sold 50 percent stake in its insurance arms Future Generali India Insurance Company to construction major Larsen & Toubro for Rs 500 crore.
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In an interview to CNBC-TV18, Kishore Biyani, CEO, Future Group said, his company's general insurance business has been doing fairly well and is cash positive. By divesting stakes in various non-core verticals, he aims to bring down debt levels of the company which is over Rs 7,500 crore.
Below is the verbatim transcript of Kishore Biyani's interview on CNBC-TV18
Q: L&T is buying partial stake in Future Retail’s insurance JV. Could you take us through the modalities of this deal? What kind of holding Larsen and Toubro (L&T) will have? What kind of holding will Pantaloon have and what has the deal been valued at?
A: The deal size will be in excess of Rs 500 crore. L&T would hold around 50 percent in this entity, Future Group will hold around 24 percent and balance will be held by Generali.
Q: Will there be an option for L&T to acquire remaining 20 percent at a later point in time?
A: There would be. It depends on how foreign direct investment (FDI) comes about and that will determine how things will happen.
Q: How will be the purchase routed in terms of direct and indirect purchases, how is the deal going to be structured?
A: Future Retail will still retain around 11 percent and the promoters will retain around 12 percent. In total, 38-39 percent is what Future Retail will be divesting.
Q: Do you think Generali Insurance will plan to increase their stake in the non-life insurance JV once the FDI in insurance comes through?
A: You will have to ask this question to Generali Insurance.
Q: In terms of your own books, how much relief will this give you?
A: There are various activities that we have been doing including life business, non-life and other transactions that have already happened or are happening, so it is a process. There are various mergers and demergers happening. Our fashion business will be created and there are certain investments in our fashion business that will be divested. We have a plan of various divestments. We have done some and some are in the offing.
Q: By how much do you plan to bring down your debt?
A: Total divestment plans including whatever we have made for the next one year, besides, what we have done is in excess of Rs 3,000 crore including this non-life insurance.
Q: Will Rs 500 crore imply that the entire business has been valued at about Rs 1,000 crore?
A: I am not talking about the valuation, but the inflow and the debt reduction should happen in that perspective.
Q: L&T has paid Rs 500 crore, does that mean the entire business has been valued at Rs 1,000 crore?
A: I am talking about the debt reduction that will happen and not about the deal size. This is because it is a multiple of the amount that has been invested up to a particular period of time and that is how it is going to finally get valued. It depends on permissions, structures and a lot of other things that will happen.
Q: On an average, what would it be in terms of time sales or enterprise value that you have struck?
A: It depends on the conclusion of the deal at that period of time, so values will come accordingly.
Q: Earlier, when you sold small stake in this insurance JV to an investment company, the valuation struck over there was a bit higher. Did you bring down valuation expectations because of the market situation?
A: Our general insurance business has been doing fairly well and is cash positive. Among the peer group it has performed reasonably well. Valuation is a function of how well your company is doing.
Q: Any details that you could share in terms of what kind of assets under management (AUM) L&T may get? What kind of premiums have you been getting on this non-life business?
A: The non-life business this March should have a premium of Rs 1,100 crore plus.