Pantaloon, the country’s largest retailer, aims to sell bonds and recast its operational strategy to conserve cash and repay short-term debt, according to sources. The company’s cash flows have been negative for some time and it has been borrowing to fund expansion. About Rs 260 crore debt, mostly bridge loans, is due for payment in the next six months. The company can partly meet this with its undrawn term loans of Rs 300 crore and by issuing short-term bonds. As on June 30, 2008, the company had a debt of Rs 2,767 crore. Its interest outgo for 2009 fiscal is estimated at Rs 200 crore.
The company’s debt to equity ratio has been rising. The ratio has gone up from 1.17:1 in FY 2007 to 1.21:1 in FY 2008 and is expected to be around 1.40:1 in the current financial year, which ends on June 30 (the company follows the June reporting cycle). Cash flows from operating activity were negative Rs 19.2 crore in FY 08, compared with a negative Rs 271.9 crore a year earlier. However, the company has recently managed to enhance from lenders its working capital limit to Rs 2,353 crore. This would help it tide over the operational fund requirements. The company has also slowed its expansion plans for FY 2009 to 2.5 million sq ft, compared with 4 million sq ft planned previously, to conserve cash.