Future Capital Holdings Ltd, the financial arm of the Future Group, the parent of India’s largest listed retailer Pantaloon Retail India Ltd, will make this year’s first initial public offering (IPO) in the capital market with its Rs449-490 crore float. The issue will open on January 11.
High on valuation: Future Group CEO Kishore Biyani.
A strong IPO market that saw a record Rs39,387.72 crore raised by 105 firms in 2007 has also helped Future Capital get a high valuation, say analysts.
The company will sell 64,22,800 shares, offering a 10.16% stake to the public.
The shares, to be sold through the bookbuilding route, are being priced in a band of Rs700-Rs765 a share. This puts the company’s valuation at between Rs4,490 and Rs4,900 crore.
“Indian banks typically have valuations of around 1.5-4.5 times book value,” said Hitesh Kuvelkar, associate vice-president of research at First Global, a domestic brokerage. “We will have to see if Future Capital’s book value justifies the Rs700 price.”
Future Capital has two major businesses—private equity and consumer finance—and is developing malls, hotels and townships. Its $850 million domestic Kshitij Fund is building 11 malls in tier II cities, and the $350 million Horizon Fund is building at least four mixed-use townships.
The company’s $400 million Indivision funds buy stakes in consumer businesses.
Future Capital also plans to launch a $350 million fund to build hotels. The Future Capital IPO will kick off another potentially big public offering season, as Reliance Power Ltd public issue, estimated to be around Rs11,700 crore, will open soon after.
“Their private equity business is very attractive,” Vaibhav Agrawal, banking analyst at Angel Broking Ltd, said. “They have focused their private equity business on the consumer space where they have a specialisation.”
But, the company’s consumer-finance business raised some short-term growth concerns because of recent interest rate hikes, Agarwal said.
The Future Capital issue will bring down the stake of Pantaloon Retail, currently the Future Group’s only listed company, to 55% from 61.23%.
Following the IPO, the stake of the promoters, Kishore Biyani, chief executive of the group, will come down to 5.97% from 6.64% and Sameer Sain, chief executive of Future Capital, to 13.49% from 15.01%.
Pantaloon’s share price has zoomed 103.37% in the past year, fuelled by growth in the retail industry and the planned public offerings of Future Capital and Future Ventures Ltd, a company that will invest in listed equities.
While there has been a board resolution for the a public float, Futures Ventures has not yet moved the capital market regulator for its IPO.