The Birlas is said to have invested close to Rs 11,000 crore in debt and equity of ABRL over the past decade.
The promoters of Aditya Birla Retail (ABRL) may be staring at a loss of Rs 7,000 crore with the proposed sale of the company to Samara Capital, Business Standard reported.
This is because the private equity firm is offering to take over only the external debt of ABRL worth Rs 4,000 crore, a banker close to the development told the paper.
The Birlas is said to have invested close to Rs 11,000 crore in debt and equity of ABRL over the past decade. Samara's offer would mean that the Birlas may lose around Rs 7000 crore with the transaction, including the entire equity invested in the grocery operator, the report said.
Aditya Birla group has invested about Rs 3,200 crore through a combination of equity and optionally convertible bonds. Of this, bonds worth Rs 287 crore are due for redemption in FY19. The group is expected to either extend the bonds or convert into equity.
ABRL also has to write off Rs 1,000 crore of debt from various unlisted group companies.
In FY17, the accumulated losses of ABRL crossed Rs 6,700 crore, the report said.
Analysts believe that since past losses of ABRL were funded largely through external borrowings, the company’s debt and interest burden shot up, resulting in continued net losses.
"Unless more equity funding is made into the company, its debt burden will remain an albatross around the neck," an industry analyst told the paper.
The Aditya Birla group had earlier wanted to merge ABRL with its listed fashion retailing business – Aditya Birla Fashion and Retail, but the company dropped the merger owing to opposition from institutional and PE investors of the fashion business.
Experts said ABRL has achieved store-level break-even in the quarter ended March 2018 as 95 percent of its supermarkets and 90 percent of its hypermarkets became profitable, adding that ABRL may post a profit at the EBITDA level in FY19 if the trend continues.
They cited store rationalisation through closure of unviable stores, fine-tuning its store format strategy, and tight control on the operating cost structure as reasons behind the break-even.