Warburg Pincus buys Future Capital Holdings stake for Rs560 crore

US-based private equity Warburg Pincus, which bought 53.7% stake in Future Capital Holdings at Rs162 per share, would inject additional Rs100 crore and make an open offer for the company


Mumbai: Kishore Biyani-led Future Group, which has a debt of over Rs5,000 crore, on Monday said it is selling 53.67% stake in Future Capital Holdings to US-based private equity Warburg Pincus to raise around Rs560 crore, reports PTI.


As per the share purchase agreement, Warburg Pincus would inject additional Rs100 crore into Future Capital Holdings (FCH) and also make an open offer under the takeover code of Securities and Exchange Board of India (SEBI).

"This transaction is in line with our stated intention to exit from non-core businesses of Pantaloon Retail and is aimed at deleveraging and further strengthening the balance sheet of the company," said Kishore Biyani, founder and chief executive, Future Group.

Biyani-led Future Group, whose core retail business formats include Big Bazaar, Food Bazaar, e-zone and Pantaloon, has a debt of over Rs5,000 crore.


Pantaloon Retail holds 55% stake in Future Capital. Earlier this year, Pantaloon Retail had formed a high powered 'review committee' with the mandate to consider various options for realignment and divestments.


"As part of the transaction, Pantaloon Retail India and its wholly-owned subsidiary Future Value Retail Ltd will sell its stake in FCH at a price of Rs162 per share to Cloverdell Investment Ltd, an affiliate entity of Warburg Pincus," the Group said in a statement after signing of the agreement.


The share price of Rs162 per share is at a premium of 14% over the prevailing market price.


It further said that V Vaidyanathan, vice chairman and managing director, would continue to head the company. Further Vishal Mahadevia, managing director, Warburg Pincus would be inducted to the Board of Directors of FCH.


As per the SEBI norms, Warburg Pincus will have to make an open offer of 26% to the shareholders of Future Capital Holdings. Open offer provides an opportunity to the existing investors to exit the company.


The board of FCH also approved a preferential allotment of shares to Warburg Pincus worth Rs100 crore.


"We welcome the investment of Rs100 crore of incremental Tier-I capital into the company. The company is poised to grow in the MSME space," Vaidyanathan said.

Morgan Stanley acted as the lead financial advisor to Pantaloon Retail and Future Value Retail. Enam Securities acted as the co-advisor to Future Group.


For the fiscal ended March 2012, Future Capital Holdings reported a net profit of Rs105.8 crore, a jump of 115% from Rs49.1 crore in the year ago period. Its asset base stands at Rs4,700 crore.


The company, formed in 2007, provides consumer and mortgage loans. Its asset quality has improved during the last fiscal with the gross non-performing asset ratio dropping to 0.08% from 0.25% a year ago.


Warburg Pincus manages assets worth about $40 billion globally and has also invested in Indian companies across sectors.


At 3.17pm, FCH was trading 4.4% higher at Rs143 and Pantaloon Retail was 7.3% up at Rs148.95 on the BSE. In the intra-day trade, FCH shares jumped 9.45% to a high of Rs149.95.


Gokarn hints at rate cuts in next RBI policy review

According to the RBI deputy governor, rising food inflation and depreciating rupee are the conflicting factors the central bank would consider while deciding on policy rates on 18 June

Mumbai: With the economic growth slipping to nine-year low levels, Reserve Bank of India (RBI) deputy governor, Subir Gokarn on Monday said below trend growth and falling crude oil prices offer the central bank a window to ease policy stance, reports PTI.

"(For one,) the growth is somewhat lower than expectations and that may have positive, moderating impact on core inflation. Two, oil prices have come off somewhat more than expected. Those are the two factors that suggest more room (for monetary policy)," Gokarn told reporters on the sidelines of an event.

The economic growth for the three months to March stood at 5.3%, its lowest in nine years, leading to calls for some urgent measures to get it back to track and achieve the targeted 7.3%.

For the financial year 2011-12, GDP growth came down to 6.5%, lower than the 6.7% recorded during the peak of the post-Lehman credit crisis and 8.4% in FY11.

One of factors being blamed for the dip in growth is the Reserve Bank's rate stance, which resulted in elevated interest rates for nearly 20 months as headline inflation continued to remain uncomfortable.

Preliminary indicators on the growth front, coupled with a fall in inflation, led the RBI to announce a surprising 0.50% cut in its key rates in its annual policy announcement in April.

In the announcement, RBI had made it clear that its room for further cuts was very limited given the high current account and fiscal deficits. The mid-quarter policy announcement is scheduled for 18th June.

Gokarn, however, pointed out that rising food inflation and depreciating rupee are the conflicting factors the RBI would consider while deciding on policy rates.

"... some factors suggest room, some factors suggest that inflationary pressure may still remain. I think we'll have to take a balanced view of these factors," he said.

Gokarn also said there has been a slight fall in the rupee price of crude, which came down to below $100 a barrel for the first time in eight months, as the rate of its fall is more than the depreciation of the rupee.

The rupee has lost over 20% in the past 12 months due to factors like widening current account deficit and concerns over the rising fiscal deficit, which have led to a fall in fund flows into the country.

On liquidity, Gokarn said the situation is "comfortable" right now going by the bank borrowings. "If we do see stress re-emerging, particularly with persistence, we clearly have the option of doing more open market operations (OMOs)," Gokarn said.

The liquidity deficit has been above the RBI's comfort mark for the past many months, forcing the central bank to infuse money into the system through bond buybacks also called as open market operations. It has infused over Rs1.25 lakh crore into the system since last November through OMOs.


China reacts to Indian warning; Cautions citizens from travelling to India

The travel advisory came as a surprise to Indian officials in Beijing as it was very rare for China to put out such advisories against India in the past on Chinese Foreign Ministry's website

Beijing: In what is seen as a tit-for-tat move, China has cautioned its citizens against travelling to India following protests over the increase in petroleum prices, after New Delhi issued advisories warning its traders against doing business in the Chinese commodity hub of Yiwu, reports PTI.

An advisory has been posted on the Chinese Foreign Ministry website as well as Chinese Embassy in New Delhi dated 1st June, which warned about travel disruptions due to protests.

"According to Indian media reports, many places in India are witnessing protests and strikes due to the recent hike in oil prices. Railways and highway transport have either come to a halt due to strikes or have been impacted to different degrees," the advisory said.

"Some shops have closed. Presently, impacted areas include: Delhi, Bangalore, Mumbai, Patna in Bihar, Allahabad and Varanasi in UP, West Bengal, Himachal Pradesh, Orissa etc," it said.

"The Chinese Embassy in India would like to alert the Chinese citizens about this and request them to confirm their itinerary with related agencies to avoid delays.

"At the same time, during this period, they should be careful about personal safety and safeguard their personal belongings," it said.

The travel advisory came as a surprise to Indian officials here as it was very rare for China to put out such advisories against India in the past on Chinese Foreign Ministry's website.

It came ahead of Tuesday's visit of India's External Affairs Minister SM Krishna to take part on the Shanghai Cooperation Organisation (SCO) summit scheduled to be held here on 6th and 7th May.

It was rare to see such an advisory in the Chinese Foreign Ministry website," Indian officials said, wondering whether it was in a way connected to two advisories put out by the Indian Embassy here warning its traders in doing business with Yiwu, in view of three incidents of kidnappings of Indian traders by the local suppliers to settle trade disputes.

While one Indian trader Danish Qureshi was released and sent home two weeks ago, two others -- Shyam Sunder Agrawal and Deepak Raheja -- who was released from illegal custody of Chinese traders in January are stranded in Shanghai fighting their case in a Chinese court.

Their issue is expected to figure during Krishna's visit here.

Also state-run China Daily today carried a feature on Yiwu saying, "No one profits when business is bad" outlining the problems for Indian and businessmen from all the world who are based there doing business for long.

Yiwu is regarded as world's biggest commodity hub where over 100 Indian businessmen still reside there despite advisories.

Indian businessmen reported to have transacted about $2 billion last year, buying massive supplies of Chinese goods for Indian markets.


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