Debt-ridden Future Group will exit from the insurance business in a time-bound manner and plans to sell its 25 per cent equity in Future Generali India Insurance Company Ltd (FGIICL) to its JV partner Generali for a cash consideration of Rs 1,252.96 crore, as part of its asset monetisation plans to pare debts.
FGIICL is a joint venture between Future Enterprises Ltd (FEL) and Generali Participations Netherlands NV (Generali) and operates in the general insurance sector. Besides, the Kishore Biyani-led group, is also exploring options for the sale of its stake in Future Generali India Life Insurance Company Ltd (FGILICL), another Joint Venture with General providing Life Insurance services.
"The company is exploring options for the sale of its remaining interests in FGILICL and FGIICL and it expects to complete the exit of its holding in the Insurance Joint Ventures in a time-bound manner," FEL said in a regulatory filing. The sale is to meet FEL's commitment under the One-Time Restructuring (OTR) scheme for COVID-19-hit companies, which it had entered into last year with a consortium of banks and lenders. As part of that, the Future Group firm has to repay the loan through asset monetisation.
As part of OTR, FEL has to pay around Rs 2,200 crore by March-end this year. Presently, FEL holds a 49.91 per cent stake in the general insurance firm FGIICL and after the deal with Generali, it will come down to 24.91 per cent. "Generali will become the controlling shareholder of FGIICL with an approx 74 per cent direct and indirect stake from its existing 49 per cent stake," it said. Besides, Generali would also have an option to buy out FEL's remaining stake in FGIICL, said a late-night regulatory filing by the Future Group firm.
"FEL has agreed to sell a 25 per cent stake in its General Insurance Joint Venture, FGIICL, to its Joint Venture partner Generali for a cash consideration of Rs 1,252.96 crore, plus an additional consideration that is linked to the date of the closing of the transaction," the regulatory filing said.
As part of the deal, Generali has also acquired an option to buy out FEL's remaining interest in FGIICL, "directly or through a nominee", at an agreed valuation, subject to applicable regulatory approvals, FEL said. "The transaction is subject to applicable regulatory approvals and other customary conditions," it added. According to the company, it had received offers from various potential buyers for its remaining 24.91 per cent interest in FGIICL.
In the Life Insurance JV, FGILICL, FEL currently holds 33.29 per cent stake, while Generali is a controlling shareholder with 49 per cent stake and the balance 16.6 per cent is with Industrial Investment Trust Limited (IITL). "It (FEL) is also exploring options for the sale of its 33.3 per cent interest in the life insurance JV and expects to complete the exit of its holding in the insurance joint ventures in a time-bound manner to meet its commitment under OTR Plan implemented under an August 6, 2020 circular issued by the Reserve Bank of India in relation to the Resolution Framework for COVID-19 related stress," it said.
Generali has received approval from the Competition Commission of India to purchase a 16 per cent stake held by Industrial Investment Trust Limited in FGILICL. It has also agreed to invest up to Rs 330 crore in tranches in FGILICL to fund its growth plans. Generali will become the controlling shareholder of FGILICL pursuant to the investment and its purchase of the 16 per cent stake held by Industrial Investment Trust Limited in the JV firm.
"Pursuant to these transactions, Generali will acquire a majority stake and control in both insurance joint ventures," the Future Group said. FEL develops, owns and leases the retail infrastructure for Future Group, which owns and operates retail chains such as Big Bazaar, Easyday and Heritage, among others. In August 2020, the Kishore Biyani-led Future Group had announced a Rs 24,713-crore deal for the sale of its retail and wholesale business, and the logistics and warehousing business to Reliance Retail Ventures Limited, a subsidiary of Reliance Industries Limited.
As part of the deal, Future Enterprises is the transferee company to Reliance Retail. Future Group's 19 companies operating in retail, wholesale, logistics and warehousing assets would be consolidated into one entity -- FEL -- and then transferred to Reliance. However, global e-commerce major Amazon is contesting the deal through its 49 per cent stake in Future Coupons Private Limited (FCPL), which is a shareholder in Future Retail Limited.
The matter is presently in dispute before the Supreme Court and the Singapore International Arbitration Centre (SIAC). Reliance Retail Ventures has, for the second time, extended the timeline for completing its Rs 24,713-crore deal with Future Group to March 31, as it still awaits regulatory and judicial clearances.