Aditya Birla Group To Issue Rs 2,800 Cr Equity For Debt Weigh Down

Aditya Birla Group chairman Kumar Mangalam Birla and his family have converted bonds worth more than Rs 2,800 crore into equity for the group’s food and grocery business, reducing the debt that has consistently weighed down profitability.

In a company filing with the Registrar of Companies. "Aditya Birla Retail (ABRL) passed a board resolution to issue equity shares worth Rs 2,837 crore to group firms Kanishtha Finance & Investment and RKN Retail, promoted by Birla, his family and some closely held companies of the family.”

The board of the retailing business had met on March 23 to give its approval. The fund infusion will involve allotment of 907 million fully paid up equity shares of Rs 10 each to Kanishtha Finance & Investment, and 1.88 billion shares to RKN Retail, said the filing.

An ABRL spokesperson said equity is being issued after conversion of optionally convertible bonds that the retailer’s promoter companies bought from time to time. “Accordingly, this was only a conversion of bonds to equity and, hence, no fresh money is coming into the company," added the spokesperson.

ABRL, the operator of More supermarkets, reported a 20% increase in FY17 sales to Rs 4,194 crore, with net loss narrowing to Rs 644 crore. However, the company had a debt of about Rs 6,573 crore on its books and financing costs amounted to Rs 471 crore for the year. The accumulated debt was mainly due to the acquisition of Trinethra and Fabmall a decade ago, and Jubilant’s Total Super Store two years ago.

 “The move will clearly reduce the interest burden for a company that seems to be struggling in the retail market. For an unlisted company to convert debt into equity, one of the possible reasons could also be stake dilution," said Abneesh Roy, senior vice-president, institutional equities, Edelweiss Securities. "Other top players are profitable despite food and grocery being a low margin business.”

The fourth-largest supermarket chain in the country after Future, Reliance Retail and D’Mart, ABRL ended last fiscal with 493 More branded supermarkets and 20 hypermarkets, covering more than 2 million sq ft of retail space.