The Reserve Bank of India has rejected Future Lifestyle Fashion’s proposal to buy a stake in Koovs, the online retailer which is now being taken over by its largest creditor to keep it afloat, a person in the know said.
Future Lifestyle had agreed to buy a nearly 30% stake in the London-listed online fashion retailer in July last year.
While the Kishore Biyani-owned firm invested Rs 54 crore last fiscal year and another Rs 34 crore in May by purchasing new ordinary shares, it did not subscribe to compulsorily convertible preference shares (CCPS) worth another Rs 64 crore, which was part of the deal agreement.
“We have not received the necessary approval for subscription of CCPS. With the RBI stating that the transaction pertaining to CCPS is not compliant, we are not likely to find an alternative route to finance the deal,” the person in the know told ET.
In a notice to the London Stock Exchange on Tuesday, Koovs said it entered into administration after the Indian company was unable to deliver on a promised 6.5 million pound (Rs 61 crore at current exchange rate) investment in to the business, resulting in unsustainable cashflow pressures. “A competitive sale process has been conducted over the past month in an effort to continue the business as a going concern, but no viable offers were received,” the filing added.
Koovs said following the appointment of an administrator, the business and assets were immediately sold to SGIK 3 Investments, a corporate entity wholly owned by Waheed Alli, its largest secured creditor.
The Future Group is not keen to contest the sale or invest further. “Koovs’ growth has not turned the way it was projected to us during the agreement and we don’t foresee a turnaround. We don’t intend to pump more money in it,” said the person in the know.
The Future Group declined to comment.
Koovs curates fashion from various international brands targeted at young Indians and about 40% of the company’s sales come from its private labels. A few months ago, it started selling its private label brands in Future Lifestyle’s Central department stores, while Biyanimanaged brands such as Lee Cooper, Converse, Cover Story and Indigo Nation were listed on its website. The online firm also signed a $1.4 million technical services contract with the Future Group to develop, host and maintain an online platform for Future Lifestyle’s Brand Factory. Koovs posted a 9% increase in revenues at Rs 59 crore for fiscal 2019.
Its loss widened to Rs 138 crore from Rs 134 crore the year before.
Source: Economic Times