With Future Retail announcing its intention to acquire retail infrastructure assets from group company Future Enterprises, its board recently approved the acquisition of the retail infrastructure assets up to maximum limit of Rs 4,000 crore of Future Enterprises in one or more tranches.
These retail infrastructure assets, though currently used by Future Retail for its large and small format stores, are owned by Future Enterprises. Future Retail pays lease rentals to Future Enterprises for these assets.
The deal will help both the companies. For Future Retail, it would significantly reduce rental costs, with the company expecting an up to Rs 650 crore reduction in annual lease rentals. The transaction would help deleverage Future Enterprises, which had a total debt of Rs 6,544 crore as of 31 March.
The deal would also help reduce inter-corporate linkages between entities of the Future group, simplifying its structure. It would result in cessation of all corporate guarantees from Future Retail to the lenders of Future Enterprises.
