Biyani may exit Future Capital entirely

Kishore Biyani may exit Future Capital Holdings (FCH), the financial services arm of the Future Group, completely. Sources close to the developments say while Pantaloon Retail, which holds 53.69 per cent in the company, will sell out, the Future Group founder and chairman is also likely to sell the 7.37 per cent that he holds in his personal capacity.

The total holding of the parent group is 61.06 per cent.

Biyani has said several times in the past one year that financial services is a non-core business for him, say the sources.

In the past one year, FCH has done quite well, giving Biyani the option of exiting at a good valuation.

“The company’s loan book has doubled to Rs 3,000 crore. This includes both wholesale and mortgage loans. Its net worth is Rs 750 crore. So, the business is not doing badly at all. For a buyer, this is a value buy,” said another source.

Pantaloon Retail is reported to have hired Morgan Stanley a month ago to find a buyer.

Sources said the company had put a professional management in place by hiring people from Morgan Stanley and Merrill Lynch. “We already have a set of professional managers to take care of the day to day operations. So, it does not make us nervous that a majority shareholder is looking to sell his stake,” said a senior executive.

The share price rose 4.66 per cent to Rs 146.44 after reports of Biyani’s possible exit became public. The market capitalisation of the company rose from Rs 906 crore to Rs 948 crore.

FCH was listed in February 2008. The issue price was Rs 765. The company’s stock closed at 139.90 on Friday — a fall of 81 per cent. The company's stock has fallen 35.6 per cent in the last one year. For the year ended March 31, 2011, FCH reported a decline in consolidated profit after tax to Rs 44.15 crore. This was due to a one-time tax provisioning of Rs 39.7 crore arising out of the merger of the company with its subsidiary, Future Capital Financial Services.

On a standalone basis, however, the profit after tax for the financial year ended March 31, 2011, stood at Rs 47.55 crore, a 175 per cent jump from the year-ago period. Its gross non-performing assets (NPAs) fell from Rs 54 crore to Rs 7 crore. The net NPAs fell from Rs 25 crore to Rs 4 crore. These improvement may have triggered to exit a business that has become very competitive.

V Vaidyanathan, managing director & CEO, FCH, was travelling abroad and was unavailable for comment. FCH was set up by Kishore Biyani and Sameer Sain, who was earlier with Goldman Sachs. Sain holds 7.5 per cent in the firm. Vaidyanathan joined from ICICI Prudential a year ago. He was given two million warrants convertible into Future Capital shares on February 2012.