Fin services arm stake sale hits hurdle

Future Group promoter Kishore Biyani’s plan to sell stake in Future Capital Holdings (FCH) has hit a valuation hurdle. According to investment bankers, Biyani is seeking a valuation of Rs 2,000 crore for the financial services arm, which is slightly over two-and a-half-times the book value of Rs 770 crore.

However, potential investors are finding that expensive. “Given that the business is new, potential buyers would be more comfortable with Rs 1,200-1,500 crore – one to one-and a-half times’ valuation,” said an investment banker.

Sources said earlier, a clutch of private equity firms such as KKR, Blackstone, Carlyle, Apax Partners and Texas Pacific Group had shown interest in acquiring Pantaloon Retail and Biyani’s stake in Future Capital Holding. However, the steep price tag has deterred them. “Now, only a couple of private equity players are doing due diligence,” said the investment banker.

 

In June, Morgan Stanley got the mandate for the deal. Pantaloon Retail holds 53.69 per cent with Biyani another 7.37 per cent in his personal capacity. The deal size for this 61.06 per cent will fetch Biyani over Rs 1,200 crore if he gets the price he expects.

When contacted, FCH Managing Director and CEO

V Vaidyanathan refused to comment. Vaidyanathan holds two million warrants of the company that will be convertible to shares next February.

According to market sources, Vaidyanathan owns 10-12 per cent of the company.

Company officials, however, claimed things were moving, albeit a little slowly. “At present, some buyers are doing due diligence. We are waiting for their feedback in the near future,” said an official, under the condition of anonymity.

Since the stake sale was reported, the company’s share price rose sharply by 40 per cent from 139.90 to 195.40 by August 1. However, they have softened since then. The company’s stock closed at 152.65 on Monday. The market cap of the company stood at Rs 989 crore.