Pantaloon Retail buys 99 lakh shares of Future Ventures for Rs8 crore, despite its weak financials

Another Future Group company, Pantaloon Industries, also bought 98 lakh shares for another Rs8 crore to prevent a further fall of the stock price on debut. But the Future Ventures share is still struggling well below its issue price

Future Ventures India Ltd, the investment company promoted by Future Group's Kishore Biyani, made its debut on the stock exchanges yesterday. On the first day of trading itself, the scrip underperformed and closed 17% below its issue price.

On the Bombay Stock Exchange (BSE), the share made its debut at Rs9.50, and after touching an intra-day low of Rs7.95, it closed at Rs8.30. Around 76 million shares were traded on the stock exchange.

There was panic among retail investors as the scrip underperformed on the opening day itself and this led to heavy selling of the company's shares. In the middle of this chaos, Pantaloon Retail, another company of the Future Group, purchased about 99.55 lakh shares of Future Ventures at Rs8.20.

Interestingly, Pantaloon itself hasn't shown any robust growth in the last quarter. So, given its own weak financials, this move by the company, to buy shares of Future Ventures, raises several doubts. Pantaloon Retail's net profit for the quarter ended 31 December 2010 stood at Rs19.91 crore, up just Rs2.33 crore from Rs17.58 crore in the preceding September 2010 quarter.

Further, Pantaloon Industries, yet another group company, also bought 98.25 lakh shares of Future Ventures yesterday at the price of Rs8.20. The promoters of the group company were prompted to buy Future Ventures shares after witnessing the heavy sell-off on the counter, and this helped the stock recover some upward momentum.

The Future Ventures stock followed the same trend on the National Stock Exchange (NSE) as well. On the NSE the share made its debut at Rs9. It touched an intra-day high of Rs9.65, but closed the day at Rs8.20. Around 174.75 million shares were traded during market hours.

A simple calculation would reveal that Pantaloon's decision to buy the Future Ventures shares cost it around Rs8.16 crore. This appears strange, for the company's net profit in the December 2010 quarter was just Rs19.91 crore. Analysts expect that the stock will slide further. This could see the company suffer losses.

Future Ventures raised Rs750 crore through the initial public offer of shares priced at Rs10 each. The issue was subscribed 1.5 times. The company's shares were mainly subscribed by high net worth individuals, while the quota for institutional and retail investors was under-subscribed.

Moneylife has reported earlier how the Future Ventures prospectus stated that it cannot compare the promise and performance of Galaxy Entertainment, the company it acquired, because it did not have the IPO records of Galaxy which are legal documents. Still, SEBI cleared the Future Ventures prospectus, unaware of this irony.  (Read, 'Future Ventures says it does not have IPO documents of a listed company it acquired three years ago'.)

Meanwhile, in trading today, the Future Ventures stock rose to Rs8.60 from yesterday's close of Rs8.30 on the BSE. On the NSE, the stock closed at Rs8.60, up from its previous close of Rs8.20.

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    COMMENTS

    K A PRASANNA

    10 years ago

    No body sells cheaper than Future group. They have kept their word! It really sells cheaper.For them, financials does not matter. They have, invested either the public money or from the loan availed from banks.

    Vikas

    10 years ago

    I bought Pantaloon Retail at 390 in nov 2010 and today it is trading at 240/- in 6 months.

    Vikas

    10 years ago

    It looks like Mr Kishore Biyani the next Ramalinga Raju and Pantaloons the next Satyam because Pantaloon's share had already crashed close to 50% a few months back and now this insane buy is a scam of its own. Are these people hand-in-glove with SEBI? What about investors stuck with them?

    shom

    10 years ago

    Worth looking at who are the HNIs who subscribed and sold the shares?

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