Kishore Biyani owned investment and business management firm Future Ventures Ltd, modeled after Berkshire Hathway, had a disappointing debut on the bourses listing 5 per cent below issue price at BSE(10 per cent in the red at NSE) on Tuesday. The stock closed the day at Rs 8.3 a share, 17 per cent below issue price of Rs 10 on its listing day. This values the company at Rs 1,308 crore(~ $292 million.
This was expected given the lukewarm response to the public issue despite pricing the shares at par, making it one of the rare companies to go public with such a pricing. In its second attempt to go public, the issue was subscribed 1.5 times, which was primarily led by corporate investors and high networth investors (HNIs) as both institutional investors and retail investors gave a lukewarm response to the issue.
The QIB portion of the issue, which was closed ahead of other investors, was subscribed just around 26 per cent, most of it by domestic institutions, while foreign institutional investors picked up just a third of the total chunk of shares picked by institutions. Just over half the portion reserved for retail investors was subscribed even with rock bottom price.
In contrast, the non-institutional investors’ portion was subscribed over 8 times. This was led by corporate investors, although HNIs also lapped up the issue. A modest opening was expected as the grey market premium was believed to have narrowed after the less than spectacular subscription levels.
Future Ventures raised Rs 750 crore ($170 million) through the IPO, almost a fifth of the sum it was looking to scoop in its previous attempt to go public three years ago. At the upper end of the price band, the company was eyeing a valuation of Rs 1,657 crore ($375 million).
Besides various privately held group firms of Biyani, Pantaloon Retail (India) is the single largest shareholder of Future Ventures with 18 per cent stake that had declined to 9.5 per cent post issue. Promoters’ combined holding has dropped to 31.13 per cent post-IPO while the ad-for-equity media investor Bennett Coleman & Co Ltd (which also has investments in Pantaloon) has seen its 12 per cent stake drop to around 6.3 per cent.
The company, which seeks to create, build, acquire and invest in, and operate businesses in ‘consumption-led’ sectors in India, had consolidated net worth of Rs 738 crore as of December 31, 2010, with the value of investments pegged at Rs 112 crore. For the nine-month period ended in December, 2010, it had a total income of Rs 399 crore (primarily through retail sales of merchandise from its subsidiaries) with a net loss of Rs 14.67 crore.
The poor institutional investor sentiment to the issue could be due to the lack of clear earnings visibility in the near term, even as the story that the company is chasing has strong, long-term potential. Future Ventures focuses on opportunities in fashion, FMCG, food processing, home products, rural distribution and vocational education. (See earlier report)