Future Group, on Monday, said that it had divested its stake in Future Capital Holdings (FCH) in favour of Warburg Pincus, a leading global private equity firm.
As part of the transaction, Pantaloon Retail India Limited and its wholly-owned subsidiary Future Value Retail Limited will sell their stake in FCH at a price of Rs.162 per share to Cloverdell Investment Limited, an affiliate of Warburg Pincus, stated in a release from the Future Group.
“Pantaloon Retail India and Future Value Retail will together sell 40 per cent of FCH to Warburg Pincus in the first phase. This will trigger an open offer where Warburg may purchase up to 26 per cent in FCH. Warburg will also take additional stake in the company by subscribing to compulsorily convertible preference shares of FCH. With all this, Warburg's stake in FCH could go up to around 70 per cent,” said V. Vaidyanathan, Vice-Chairman and Managing Director, FCH, while talking to The Hindu.
Warburg Pincus also announced that it had reached an agreement to infuse Rs.100 crore of primary capital through a preferential allotment in FCH. The board of directors of Future Capital Holdings has approved this preferential allotment of equity shares and / or convertible securities to Warburg Pincus.
Mr. Vaidyanathan will continue to head the company and Vishal Mahadevia, Managing Director, Warburg Pincus, will be inducted in to the FCH board.
Formed in 2007, as a wholly-owned subsidiary of Pantaloon Retail, FCH is a leading non-banking finance company (NBFC), focusing largely on providing loans to MSMEs. It also provides gold loans, consumer durable loans, two-wheeler loans and senior secured wholesale loans, wealth management and broking services. It is listed on the BSE and the NSE. As on March 31, 2012, the company had made advances of Rs.4,670 crore. It has a network of 197 branches in 41 cities.
In a statement, Kishore Biyani, Founder and Group CEO, Future Group, 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.”
“The company is on a firm footing and is well poised to grow in the MSME space, and we will continue to invest and grow in the chosen businesses,” said Mr. Vaidyanathan.
Vishal Mahadevia, Managing Director, Warburg Pincus India Private Limited, said, “Future Capital is well placed to address the needs of the large underserved base of MSME and retail customers across India.”
Analysts are of the opinion that the deal is a good one for the Pantaloon Group and will give it access to the much-needed capital.
Sudip Bandyopadhyay, CEO & MD, Destimoney Securities, said, “it is a good transaction from the point of view of Future Capital Holdings as well as the overall Pantaloon Group.
“In Warburg Pincus, Future Capital will get stability and an opportunity to grow the business without bothering about capital constraints.”