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Kishore Biyani sells Future Capital Holdings to Warburg Pincus for Rs 560 cr

Kishore Biyani-led Future Group, whose core retail business formats include Big Bazaar, Food Bazaar, e-zone and Pantaloon, has a debt of over Rs 5,000 crore.

BT Online Bureau   Mumbai     Last Updated: June 4, 2012  | 18:16 IST

Debt-ridden Future Group is selling 53.67 per cent stake in Future Capital Holdings to US-based private equity Warburg Pincus, to raise an estimated Rs 560 crore.

Kishore Biyani-led Future Group, whose core retail business formats include Big Bazaar, Food Bazaar, e-zone and Pantaloon, has a debt of over Rs 5,000 crore.

According to the share purchase agreement, Warburg Pincus would inject another Rs 100 crore into Future Capital Holdings (FCH) and also make an open offer under the takeover code of the Securities and Exchange Board of India (Sebi).

Pantaloon Retail holds 55 per cent stake in Future Capital. Earlier this year, Pantaloon Retail had formed a high powered 'review committee' with the mandate to consider various options for realignment and divestments.

"As part of the transaction, Pantaloon Retail India and its wholly-owned subsidiary Future Value Retail Ltd will sell its stake in FCH at a price of Rs 162 per share to Cloverdell Investment Ltd, an affiliate entity of Warburg Pincus," the Group said in a statement after signing of the agreement.

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It further said that V Vaidyanathan, Vice Chairman and Managing Director, would continue to head the company. Further Vishal Mahadevia, Managing Director, Warburg Pincus would be inducted to the Board of Directors of FCH.

The share price of Rs 162 per share is at a premium of 14 per cent over the prevailing market price.

Shares of Future Capital Holdings surged 3.65 per cent to Rs 142. In the intra-day trade, the scrip had jumped 9.45 per cent to a high of Rs 149.95.

Besides, Pantaloon Retail shares were also trading 3.60 per cent higher at Rs 143.85.

Commenting on the transaction, Future Group Founder and Group CEO Kishore Biyani said: "This transaction is in line with our stated intention to exit from non-core businesses of Pantaloon Retail and is aimed at deleveraging and further strengthening the balance sheet of the company".

According to Sebi norms, Warburg Pincus will have to make an open offer of 26 per cent to the shareholders of Future Capital Holdings. Open offer provides an opportunity to the existing investors to exit the company.

The board of FCH also approved a preferential allotment of shares to Warburg Pincus worth Rs 100 crore.

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"We welcome the investment of Rs 100 crore of incremental Tier-I capital into the company. The company is poised to grow in the MSME space," Vaidyanathan said.

Morgan Stanley acted as the lead financial advisor to Pantaloon Retail and Future Value Retail. Enam Securities acted as the co-advisor to Future Group.

For the fiscal ended March 31, 2012, Future Capital Holdings reported a net profit of Rs 105.8 crore, a jump of 115 per cent from Rs 49.1 crore in the year ago period.

Its asset base stands at Rs 4,700 crore.

The company, formed in 2007, provides consumer and mortgage loans. Its asset quality has improved during the last fiscal with the gross non-performing asset ratio dropping to 0.08 per cent from 0.25 per cent a year ago.

Warburg Pincus manages assets worth about $40 billion globally and has also invested in Indian companies across sectors.

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