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Kishore Biyani’s Future Retail No Turnaround Insight

November 19, 2014


Future Retail TrurnaroundKishore Biyani led Future Retail Ltd reported a recurring PBT loss of Rs-282mn during Q2FY15. Revenue growth was 10% y/y and EBITDA margins rose 160bp y/y (flat q/q). This was led by gross margin expansion of 120bp y/y on account of improved product mix (in favour of apparels which now account for over 35% revenue share). Staff and rental costs witnessed modest sequential increases of 1% and 3% q/q, respectively. However, other expenses rose 9% q/q on account of higher marketing spend.

Value Retail registered 14.1% SSSG and Home Retail registered 7.8% SSSG in Q2. Early onset of the festive season, improved mix and higher electronics sales led to healthy SSSG. Inventory psf remain flat QoQ at i.e. Rs 3,091 psf from Rs 3,099 psf in Q2FY14.

During Q2, gross space addition stepped to 0.67mn sq ft, although the net addition was 0.57mn sqft given space rationalization and the net space as of Sep’14 was 10.93mn sq ft. Future Retail aims to add 1.1-1.2mn sq ft in FY15. Much of the new store additions were done for Big Bazaar (+19 q/q) and FBB (+8 q/q) formats across Tier1/2 cities

The Company has raised funds of to Rs 2.50 bn by issue of fresh capital through preferential issue to Brand Equity Treaties (Rs2 bn) and to warrants promoters (Rs481 mn ‐25% of proceeds). The company in process of raising funds up to Rs16 bn through a rights issue (5:8 ratio at Rs103 per share).

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