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I'll not tender my personal stake in the open offer: V Vaidyanathan

Interview with Vice-Chairman & MD, Future Capital Holdings

V Vaidyanathan
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Even after a change in the shareholding pattern, it would be business as usual for Future Capital, says V Vaidyanathan, vice-chairman and managing director, Future Capital Holdings. In an interview with Niladri Bhattacharya, he outlines the company’s strategy and adds new investor is satisfied with the company’s current business model. Edited excerpts:

To what extent could Warburg’s stake in the company rise?
Today, (PRIL) and (FVRL) have executed an agreement to sell 40 per cent stake in Future Capital to Warburg Pincus. PRIL would still hold 13.7 per cent of Future Capital stock. This would trigger an open offer. If the shares tendered in the are less than 26 per cent, Warburg can purchase the remaining from PRIL. Additionally, Warburg would invest Rs 100 crore in the company. Considering these, Warburg’s stake could go up to 70 per cent.

What would be your role in the company?
I will continue to head the company in my present capacity. Warburg would have the right to induct two members into the company’s board. Vishal Mahadevia, country head of Warburg Pincus India, would join the board.

Would you sell your in the open offer?
I will not tender any of my personal stake in the open offer.

Has Warburg sought any change in the manage-ment structure or business plans?
It has seen the business model and processes and has met the team. It is happy about investing in the company and with the company’s plans, and has not asked for any change.

Is there any exit strategy in place for Warburg?
At this stage, it is too early to think of an exit. Warburg Pincus is a long-term player with a proven track record in partnering many successful entrepreneurs in India. Typically, it invests keeping a 5-10 year horizon in mind.

You have an arrangement with Future Group for opening branches in retail stores. Where does this stand?
We have a long-term agreement with Future Group for opening financial branches and offering financial products and services. We finance mainly consumer durables. How-ever, we also offer other financial services at these stores.

Please give an outline of the growth strategy for the next two years. How do you plan to use the Rs 100 crore to be infused by Warburg? Would you consider any new sector?
No, we will stick to financing micro, small and medium enterprise (MSME) customers as our core business. The infusion of Rs 100 crore would be deployed in building the book for MSME, gold loans and durables financing.

Of late, we have seen many private equity companies evincing interest in acquiring stakes in non-banking financial companies . What is the reason for this?
NBFCs are poised to see good growth, as these operate in specific and niche areas, which in turn have high growth potential. Just like banking, this, too, is a proxy to the economy and offers good growth opportunities.

Did the recent economic and regulatory developments bother Warburg Pincus before the deal?
Warburg Pincus is very committed to the long-term potential of Indian financial services and is willing to stay invested through these cycles. On the regulatory side, recent proposed changes like a change in provisioning and capital adequacy norms would eventually settle down, as the new normal would be good for the industry in the long run.

Will Future Capital be interested in applying for a banking licence?
No, we do not have any such plans yet.

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