The Future Group, which owns India’s largest chain of retail stores, has started formal discussions with private equity (PE) funds to sell equity stakes in new companies that are formed by splitting the operations of its flagship Pantaloon Retail (India).
The group plans to raise Rs 1,100-1,200 crore through this divestment exercise, helping it to expand retail footprint from 12 million to 30 million square feet by 2013.
Over a dozen PE funds are participating in a road show organised by Future Group’s adviser Enam Financial Consultants. The road show started two days ago.
Apax Partners, TPG Capital (formerly Texas Pacific Group), Temasek, Bain Capital and Eton Park are among the PE players that are discussing the prospects of an equity investment.
“We are in various stages of discussions with various players,” said Kishore Biyani, Group chief executive officer (CEO) of Future group. He, however, declined to share the details. Private equity funds were unavailable for comments.
Under the ‘realignment’ proposal approved by Pantaloon Retail’s board on April 13, Pantaloon Retail will be renamed Future Markets and Consumer Group. Pantaloon Retail’s board will continue to be the board of Future Markets.
Two other companies — Future Consumer Enterprise and Future Merchandising — will also be formed. Future Markets will be the holding company and run the FMCG business. Future Consumer and Future Merchandising will handle the retail and fashion businesses respectively. While foreign direct investment (FDI) in multi-brand retail is not permitted under Indian law, the press notes 2, 3, and 4 issued in February allow FDI of up to 49 per cent in operating and subsidiary companies if the majority stake is controlled by Indians.
“Pantaloon is trying to attract FDI through the amended FDI norms,” said the COO of a rival retail chain, who did not want to be quoted.
Pantaloon Retail’s senior management team is making presentations to prospective investors, explaining the benefits of the proposed ‘realignment’ and how each business is poised to grow. “Heads of different verticals are engaging with the PE players. These funds are more keen to learn about the ground level operations,” said a Future Group official who has direct knowledge of the subject.
Saneejv Agarwal, CEO of retail brand, Pantlaoons, Big Bazar CEO Sadashiv Naik, Rakesh Biyani, Kishore Biyani’s cousin and director on the Pantaloon Retail board, are interacting with the PE players. The company is also making a preferential allotment to promoters and investors. An extraordinary general meeting is convened on May 12 to get shareholders’ approval for the preferential issue which will result in promoters raising their stake in the company to 51 per cent from 46 per cent.
The company is planning to raise more than Rs 1,500 crore through preferential as well PE investments to expand its retail footprint from 12 million square feet to 30 million sq ft by 2013. It plans to increase the number of Big Bazar outlets to 300 from 113.
Source: Financial Chronicle