Mumbai: Stocks of Kishore Biyani-led Future Group have been soaring high so far this year, on the back of a recovery in urban consumption, and expectations of reforms that will likely boost retail-focused sectors.
Stocks of Future Retail Ltd, which has various segments such as small stores network Easyday, supermarket chain Big Bazaar, fashion retailer fbb, and more, have jumped 345.7% so far this year.
Shares of other group companies such as Future Enterprises Ltd, Future Consumer Ltd and Future Lifestyle Fashions Ltd have soared 222.31%, 237.13% and 204.41%, respectively, so far this year. This compares with a nearly 19% rise for benchmark Sensex index in the same period.
“There is a recovery in urban discretionary consumption. That has been aided further by demonetisation and GST (goods and services tax) , as the consumers opted for stores which accepted digital payments, compared to unorganized sector," said Abneesh Roy, a research analyst with Edelweiss Securities Ltd. Roy tracks Future Lifestyle and Future Retail stocks from the pack.
“The D-mart listing has also re-rated the sector. Then the talk on further reforms by the government, such as possibility of FDI (foreign direct investment) being allowed in multi-brand retail at some stage. Hopes are running high on that expectation as well," Roy added.
On 22 March, Avenue Supermarts Ltd, the parent of D-Mart, made a stellar debut with listing gains of 114.29%. Currently, the stock is up 259.33% from the issue price at Rs1,074.40.
Roy said that grocery retail space had seen consolidation, and Future Retail has been at the forefront of such action, snapping up major acquisitions, including Easyday from the Bharti Group and N. Chandrababu Naidu-owned Heritage Foods in 2016.
A spokesperson for the Future Group declined to comment on the rise in share prices of its group companies.
Future Retail was the first of listed companies of the group whose restructuring was said to be completed, following which it saw a barrage of brokerage firms initiating coverage of the stock.
“Growth is expected to be exponential as it would be driven by expansion of product portfolio; and incremental penetration of existing products within Future Retail Ltd (FRL) stores, and expansion of distribution network both at FRL level as well as other tie-ups," said research analyst Nitasha Shankar, in a Yes Securities report dated 30 March.
Of all the Future Group stocks, Future Retail is the most tracked—with 10 brokerages having the stock in their coverage universe. All the 10 brokerages have a buy or outperform rating on the stock.
But few analysts cover other stocks of the group.
Yes Securities remains the only brokerage tracking Future Consumer, according to Bloomberg data.
“Future Consumer Ltd (FCL) is the food and FMCG arm of the Future Group. Post the group level restructuring, FCL has been largely focusing its energies on the food space. Food and beverages formed about 94% of the brands business," said Shankar in the report mentioned above.
Future Enterprise Ltd, the infrastructure, investment, and non-retail arm of the business is a listed jumble of businesses including general insurance firm Future Generali and the group’s logistics solutions business Future Supply Chain Ltd that primarily serves other group companies.
This logistics arm has now filed draft papers with capital markets regulator Securities and Exchange Board of India (Sebi) for an initial public offering on 28 August this year.
The company had revenues of Rs561.18 crore for FY16-17, while its profits during the year was Rs45.75 crore, as per the company’s draft red-herring prospectus.