Private Equity firm Baring Private Equity Partners India Ltd has emerged as the front runner to acquire a majority stake in Kishore Biyani promoted financial services provider Future Capital Holdings Ltd, three people with direct knowledge of the talks told VCCircle. Others in the race include L&T Finance Holdings Ltd and Dewan Housing Finance Ltd.
Earlier, private equity investor CX Partners was in talks to buy a stake in the public listed firm.
“The talks with CX Partners are off and the company is now talking to other industry players and private equity investor,” one of the persons said on condition of anonymity as the deal is yet to be signed.
Other person involved in the deal said, “Barings India is emerging to be a front runner.”
While V Vaidyanathan, vice chairman and managing director of Future Capital Holdings could not be reached immediately for comments, a senior Barings India official confirmed talks were on and in an advanced stage.
An e-mail query sent to spokesperson of L&T Finance did not elicit any response and a senior Dewan Housing Finance official denied the talks were on.
Future Capital scrip last traded at Rs 127.65 a share, down 0.37 per cent on the BSE in a strong Mumbai market on Thursday. The market capitalisation of the company as on date is Rs 827 crore. Sources believe the deal will be struck at 10-12 per cent discount to the current market price.
Public listed firm Pantaloon Retail India owns 53.6 per cent stake in Future Capital while the group promoter Biyani held 7.3 per cent in the firm as of December 31, 2011. In March, Biyani and Vaidyanathan had let convertible warrants cumulating to 10 million shares lapse as the share price was much lower than the price at which it was to be converted into shares.
However, early this month, Biyani transferred 2.6 per cent to Vaidyanathan who now holds around 7.37 per cent in Future Capital.
If Pantaloon Retail sells its entire stake at the current market price it would translate into a deal worth Rs 438 crore ($86 million). This would also trigger a mandatory open offer which could cost another Rs 150-200 crore ($30-40 million), taking the total deal size to well over $100 million.
Future Group chief Kishore Biyani had been looking at unlocking the value in his financial services company and raise money to pare rising debt of some of his other group firms including the flagship company Pantaloon Retail.
Last year, Biyani appointed investment bank Morgan Stanley to look for a buyer for a strategic stake sale in Future Capital.
Baring PE India’s interest in the financial services space is not new. The PE firm has invested in Muthoot Finance Ltd and Manappuram Finance, both gold loan majors in India. In the past it has also invested in JRG Securities, another public listed financial services firm, in which it holds 49.38 per cent stake. JRG Securities is into brokerage business.
Private equity investors have been investing in non banking financial companies as they provide a proxy exposure to a play on banking sector in India. As per VCCEdge, the research platform of VCCircle, there were 34 deals worth $691.76 million during 2011 and in 2012, so far, there have already been 12 deals worth $224.1 million.
Among the more high profile transactions last year, KKR India and IFC invested in Kolkata-based public listed firm Magma Fincorp Ltd.
Future Capital Holdings' advances grew to Rs 4,257 crore as on 31 December 2011 from Rs 2,367 crore as of 31 December 2010. The company's gross NPA ratio stood at 0.04 per cent as on 31 December 2011. The net NPA ratio was nil.
Future Capital’s net profit almost trebled to Rs 28.9 crore in the quarter ended December 2011 as against Rs 10 crore during the same period previous year. Revenue also more than doubled to Rs 181 crore in the same period.
CX Partners In Advanced Talks To Buy Stake In Future Capital Holdings