The Future Supply Chain IPO, which opens on 6 December, will see a total stake dilution of 24.43%, and no new shares will be issued
Mumbai: Future Supply Chain Solutions Ltd, the logistics arm of Kishore Biyani-led Future Group, on Wednesday said its Rs650 crore initial public offering (IPO) will open on 6 December.
The company has set a price band of Rs660-664 per share for the IPO, which values it at Rs2,644-2,660 crore. The offer will close on 8 December.
Parent Future Enterprises Ltd and special situations fund SSG Capital will collectively sell 9.78 million shares. The offer will see a total stake dilution of 24.43%. No new shares will be issued.
Future Enterprises plans to sell 1.95 million shares, which will fetch the parent company Rs130 crore at the upper end of the price band. Post offer, the shareholding of Future Enterprises will drop by five percentage points to 53%.
Future Supply Chain hopes recent changes under Goods and Services Tax (GST) will help the logistics business.
“As the market evolves with GST, we are quite excited by the opportunity that’s going to get created in this industry in the next 10-20 years," Rakesh Biyani, chairman of Future Supply Chain said in a media briefing.
“But I would say that one has to look at a business in terms of every five years. Future Supply Chain is ready for the market; we understand the art of efficiency and the science of supply chain."
SSG Capital, through its entity Griffin Partners Ltd will sell a total of 7.83 million shares, worth Rs520 crore. Its stake will be reduced to 14.63% from the existing 34.18%.
In November, SSG Capital had sold a 4.9% stake in Future Supply Chain to the Edelweiss Crossover Opportunities Fund.
Edelweiss Crossover Opportunities Fund, which is an alternative investment fund focused on pre-IPO investments, raised approximately Rs1,750 crore, Mint reported in November.
Future Supply Chain depends largely on business from other Future Group entities including Future Retail Ltd and Future Consumer Ltd.
At present, the company makes nearly 63% of its revenues from group companies, although it wants to take the contribution of external clients to 50% going forward, said Future Group chief financial officer Sanjay Jain.
In 2016-17, the company reported a revenue of Rs577 crore, up 9% from the previous fiscal. It reported a net profit of Rs45.75 crore in 2016-17, up 55% from a year earlier.
The majority of revenues come from contract logistics that made up nearly 70% of total revenues in FY17, as per data from the company’s red herring prospectus. It intends to keep the breakup that way.
“We refrain from doing last-mile delivery and in the present form and shape, we are better off serving non last-mile delivery, we are better off that way," Jain said.
“Our business model is slightly different," said Mayur Toshniwal, managing director of Future Supply Chain.
“Today in India, temperature-controlled infrastructure is largely used by commodities, potatoes, apples and others. Our motive of getting into this business is very different. We believe that going forward, as the country crosses the $2,000 (per capita income) mark, the consumption basket changes very rapidly. At that time, the Future Group strategy of supplying to small stores will need a strong supply chain to back it up."
Future Supply Chain has appointed Edelweiss Financial Services Ltd, CLSA India Pvt. Ltd, Nomura Financial Advisory & Securities (India) Pvt. Ltd, IDFC Bank Ltd, IIFL Holdings Ltd and YES Securities (India) Ltd to manage the share sale.
The Indian logistics industry comprising segments such as road, rail and coastal freight, warehousing, cold chain and container freight stations and inland container depots, estimated at Rs6.4 trillion in fiscal 2017, is expected to grow at a compound annual growth rate of 13% to Rs9.2 trillion by fiscal 2020, according to a report by rating agency Crisil Ltd.
Earlier this month, Mahindra Logistics Ltd, the logistics arm of automobile maker Mahindra and Mahindra Ltd, launched its Rs829.36 crore IPO. The IPO saw a subscription of 7.83 times.
IPO fund raising in 2017 has breached the last record set in 2010, when 64 companies raised Rs37,534.65 crore.
Until October 2017, the Indian primary market has witnessed 30 IPOs with companies raising Rs47,099 crore, according to data from primary market tracker Prime Database. In 2016, 26 companies raised Rs26,493.8 crore through the IPO route.