Covid-19: Future Lifestyle seeks recast of payment to operational creditors

CARE Ratings has revised outlook on Future Lifestyle Fashions Ltd's long term loans from "positive" to "negative".

Future Lifestyle Fashions Ltd is seeking ad-hoc working capital limits from lenders to enhance liquidity as a temporary closure of outlets during the lockdown triggered by coronavirus (Covid-19) has hit cash flows. It is also negotiating with its operational creditors to restructure the payment terms.

CARE Ratings has revised outlook on Future Lifestyle Fashions Ltd’s long term loans from “positive” to “negative”. Rating is 'AA-'. The sharp fall in the share price of listed group entities has impacted the overall financial flexibility of the group and restricted the ability to raise further capital.

The reaffirmation of ratings of Future Lifestyle Fashions Ltd. (FLFL) derives strength from the vast experience of the promoters (Future Group) in the retail industry, established pan-India presence of various operationally profitable formats, healthy same-store sales growth and established portfolio of own and licensed brands.

The rating strengths are however tempered by moderate return on capital employed, high operating cycle coupled with susceptibility to economic cycles and increasing competition in the fashion retail industry.

While lock-down has impacted the company’s ability to generate cash flows, it, however, has adequate liquidity in the near term. The company has applied to lenders for a moratorium on payments as per the relief package (announced by RBI on March 27, 2020) and as per the lenders, the approval is under process. FLFL is also looking to enhance its working capital limits to augment its liquidity position.

As per the discussion with the management, the company has access to need-based support from its PE investors should the situation arise. In addition, the company is looking at postponing lease rentals and also taking other cost control initiatives to support liquidity. Further, the company is in discussion with the banks for sanction of ad-hoc working capital limits.