Acuite again downgrades financial instruments of Future Enterprises

Acuite Ratings and Research has again downgraded several financial instruments of Kishore Biyani-led Future Enterprises.

Acuite Ratings and Research has again downgraded several financial instruments of Kishore Biyani-led Future Enterprises. The current rating action is on account of a delay in interest servicing to the tune of Rs 13 crore on certain non-convertible debentures (NCDs) of Future Enterprises, an entity consolidated with Future Retail for the purposes of analysis.

However, these NCDs do not form a part of Acuite's rated debentures of Future Enterprises. In line with the policy on default recognition for unrated instruments, said Acuite, the rating has been revised downwards to C/A4. "It is to be noted that the group has significant near-term debt obligations on both bank debt and capital market instruments."

The group had opted for a moratorium as per the Reserve Bank of India (RBI) guidelines that are set to expire in August-end. Acuite also noted that Future Retail slipped on coupon payments on its foreign currency bonds in July. Since there is a grace period of 30 days as per the bond indenture. Any failure to make the coupon payment within this period will be treated as an event of default.

On August 13, Acuite had revised the rating on instruments and facilities of Future Retail and Future Enterprises to BB-plus/A4-plus while keeping the rating on watch with negative implications. The rating action was on account of the significant increase in liquidity pressures due to continued challenges in the release of additional limits from banks and delays in the closure of the strategic investment deal.

Acuite said there has been considerable delay in the closures of the said deal which has impacted the long term funding support to the group. The significant drying up of operational cash flows due to the continued lockdowns has been a major contributing factor for the group's liquidity pressures.