Future Group to buy majority stake in two Centrum firms

The Kishore Biyani-controlled Future Group has inked a strategic alliance with financial services conglomerate, Centrum, under which it will acquire controlling stakes in Centrum’s foreign exchange and retail broking businesses. It will also take a small stake in Centrum’s investment banking enterprise.

A press release issued by Centrum Group says the three specific areas that the two signatories to the strategic deal are partnering for are:
• Indivision fund, a private equity fund managed by future group will acquire 10% stake through a preferential allotment in Centrum Capital Ltd, the group’s flagship investment banking company at an enterprise value of Rs1,200 crore.
• Future Capital Holdings Ltd will acquire 50.1% stake in CentrumDirect Ltd, the forex money changing subsidiary of Centrum Capital Ltd through fresh capital infusion of Rs75 crore.
• Future Capital Holdings Ltd will also acquire 50.1% in a new joint venture company Centrum Wealth Managers Ltd, for Rs25 crore. Centrum’s existing Retail Broking, PMS and Financial Products Distribution businesses will move into Centrum Wealth Managers Ltd.

Read more in The Livemint article.

Future Capital picks up 28% in Sankalp Stores

Future Capital, the financial arm of Future Group, has picked up an estimated 28% stake in Sankalp Retail Value Stores, a franchisee of the US-based discount format, My Dollarstore. The discount format will now be a part of Pantaloon Retail’s larger strategy to set up imported bazaar concessions as a shop-in-shop concept in its hypermarket, Big Bazaar.

A team of Big Bazaar is working on setting up the new format which will offer a huge array of imported products at reasonable rates. Anil Biyani, Kishore Biyani’s younger brother, is likely to be in charge of imported bazaar, sources said. The format is also expected to help scale up the profit margins in Big Bazaar.

Read more in The Economic Times article.

Biyani to up his stake in Pantaloon

Kishore Biyani, the promoter of Future group, plans to increase his stake in Pantaloon Retail India Ltd (PRIL). The stake increase is expected to be around 13.5%, which will be done by infusing over Rs 1,000 crore through convertible equity warrants.

Capital funding, according to analysts, would have been the biggest roadblock Pantaloon Retail would have faced in achieving its growth ambitions.
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In all, the company is looking at raising over Rs 1,200 crore through a combination of promoter investments, two undisclosed institutional investors and employees. Analysts envisage the dilution in equity to be around 17%.

The PRIL board has approved raising funds to the tune of Rs 200 crore by issuing 40 lakh equity shares at a premium of Rs 498 per share. Pantaloon Retail India Ltd (PRIL) has also finalised plans to invest Rs 325 crore into a subsidiary company, Pantaloon Future Ventures Ltd (FVL).

Read more in The DNA Money article.

Future Capital IPO Decided; Pantaloon To Invest Rs 325 Crore In Future Ventures

Future Capital Holdings, the financial arm of the Kishore Biyani-owned Pantaloon Retail, is tapping capital market to raise funds. The board of directors of Pantaloon Retail has taken a decision to go public. Pantaloon Retail owns 74 per cent stake in Future Capital, while a 10 per cent stake is held by hedge fund Och-Ziff Capital, and the rest by employees including CEO Sameer Sain.

At a meeting held on Saturday, the board of Pantaloon Retail decided that the IPO of the Future Capital holdings Ltd would seek to sell 10 per cent of the post issue capital. The company has made a stock exchange announcement today to this effect. UBS Investment recently valued the business of Future Capital to be around Rs 3,000 crore.

Future Capital operates four private equity funds - Kshitij ($850 million domestic real estate fund), Horizon ($350 million international real estate fund); IndiVision Capital ($400 million consumer sector private equity fund), besides a $350-million private equity fund. Future has also launched a consumer credit business.
The board has also approved an investment of Rs. 325 crore in Pantaloon Future Ventures Ltd, a wholly owned subsidiary of the company for making downstream investment into Future Ventures India Ltd. which has been set up to undertake new businesses, incubation of new ideas and businesses and getting into joint ventures, the stock exchange announcement said.

Sula Wines Sells 20% Stake For Rs 50 Crore To Indivision Capital

Indivision Capital, the private equity firm sponsored by the Future Group (formerly Pantaloon), has picked up 20 per cent stake in Sula Wines for Rs 50 crore ($12.5 million). This will be the second PE investment in Sula. Earlier, in 2005, GEM India Advisors picked up about 30 per cent stake in Sula for Rs 15 crore ($3.5 million).

GIA is also divesting a part of its holding to Indivision, after which it will keep about 20 per cent stake in Sula. The remaining part of the stake will be in the form of fresh equity.

Sula has appreciated five times in valuation in the last two years, and this seems to be a great investment for GIA. Sula is headed for an IPO in 2008. Sula's founder Rajeev Samant said that he had received offers from a variety of PE funds and strategic investors (probably at 5-10 per cent higher valuation), but decided to go with Indivision, since the group retail chain Big Bazaar offered "excellent synergies for distribution".

Besides Sula, another wine maker Champagne Indage had sold close to 10 per cent stake in the Singapore-based Arisaig Partners in 2005. Reliance Capital did also pick up 9 per cent stake in the Chougule family-controlled Champagne Indage.Grover Vineyards was also looking to raise private equity. Ambit Corporate Finance was advising them.

Brand Factory to invest Rs 500 cr by 2010

Brand Factory — the discount store format of the Future Group which runs retail business chains such as Central and Big Bazaar — is planning an expansion drive to set up 55 outlets in 40 cities in India by 2010.

The group launched its first Brand Factory store in Pune (its fourth) last week and plans to open one each in Hyderabad and Noida next week. It has three stores, one each in Bangalore, Hyderabad and Ahmedabad.

Vishnu Prasad, President and Chief Executive Officer, Central and Brand Factory business for Future Group said that the company is expected to invest about Rs 500 crore by 2010 for the 55 stores it plans by then.

Prasad said that the BF stores will offer 15 per cent to 25 per cent discount round the year on a wide range of national and international brands.Prasad said that the BF stores will provide an important link in shifting a customer from stitched to readymade to branded apparel. The only difference between what is offered in the Central or other formats of the company is the freshness of design, he said, adding that BF will not sell defective garments.

Sadashiv Nayak, head of Western market for the group, said that BF will target the young customers who want wear a brand but don’t want to spend big money for them. BF, with its discount appeal will give them the brand experience without any compromise on quality.

Nayak did not offer any projections of the sales revenue BF will record when it reaches the 55-outlet mark in 2010. He said that the business started only during October, 2006, and income projections have not been built so far. He, however, claimed that the customer response in the three stores opened so far has been “huge”.

Future group enters consumer finance

The Kishore Biyani-promoted Future group, known for its retail chains Big Bazaar and Food Bazaar, today entered the growing segment of consumer finance by launching its consumer finance outfit called Future Money.

The new company, which will fall under Future Capital Holdings, will initially provide credit up to 70-80 per cent of the cost of purchases made by customers at Future group’s retail stores. It will later consider extending its services to retail outlets owned by others, providing home and car loans, and floating credit cards. The venture will be headed by Rakesh Makkar, who was earlier with Citifinancial.

“Right now there is a complete disconnect between financing and consumption. Future Money is aiming at converging that. After all a retailer is interested in selling goods and by providing financing, we can perhaps increase sale of items like furniture and consumer electronics,” said a senior executive of Future Money.

Makkar said he was not concerned with the increasing cost of money. “It is increasing for everyone, not just us. In fact, we are looking at offering competitive lending rates,” he said. Big Bazaar, Future group’s format of hypermarkets, has an arrangement with ICICI Bank for co-branded credit cards. This relationship will continue as of now.

Reliance Retail and Bharti Retail are also planning in-house credit arms to support their retail ventures. “We will enjoy at least a three-year headstart. It is not easy to set up well-penetrated credit facilities,” said a senior executive of Future Money.

As Future Capital Holdings has the status of a non-banking finance company, Future Money need not apply for it.