The ICRA on Friday downgraded the creditworthiness of the Future Group. In a March 20 report released by the company it cited the "continued high debt levels" of the Kishore Biyani-led Group and also a substantial increase in "pledged shareholding of the promoter Group across its listed companies due to continued decline in share prices" to justify the revision in ratings.
The independent credit rating agency has now classified the company as being BB+ (Stable) which also means that the company is firmly in the junk category.
According to the ICRA report the company even as Future Corporate Resources Private Limited’s external debt reduced to Rs. 1,430 crore (excluding the impact of Ind-AS) the company's total debt remains high.
"Despite monetisation of investments across various Group entities, the total Group debt has increased as on December 31, 2019," the report noted.
The report attributes this increase primarily to a rise in the debt of the operating companies. The total debt of the Group's listed companies rose from Rs. 10,951 crore in March 31 2019 to Rs. 12,778 crore as on September 30 of the same year.
"With continued reduction in the share price of the Future Group listcos, the total Group debt/market capitalisation has increased to 1.2 times as on March 16, 2020 from 0.4 times as on March 31, 2019," ICRA said.
This has in turn led to a rise in pledged shareholding that has resulted in reduced financial flexibility, the report opined.
The company has been affected by a decrease in business that came in the wake of a changed business environment and regulatory changes. In incurred an operating loss of Rs. 20.7 crore in FY2018 and Rs. 18.7 crore in FY2019.
"Coupled with high interest expenses, this resulted in a cash loss of Rs. 627.4 crore in FY2018 and Rs. 744.9 crore in FY2019," the report explains.
The company however believes that rumour-mongering is part of what is hurting the Group's shares. According to an earlier report by The Telegraph, a regulatory filing by Future Retail states that social media forwards and similar messages that talk about the company's financial health has adversely affected stock prices.
“These baseless rumours have apparently impacted some of our listed company stocks in the past few days,” the publication quoted Biyani as saying in a message to stakeholders.
The recent coronavirus outbreak has also wreaked havoc on the stock market.
In recent weeks the stock market appears to be in a free-fall amid panic triggered by the novel coronavirus. On March 12, the Sensex had dropped by 3,204.30 points before closing 2,919 points lower. It has since shown improvement -- especially after Prime Minister Narendra Modi's recent announcement that an economic task force would be set up to look into the fallout created by the coronavirus in the country.