The initial public offer (IPO) of investment and business management firm Future Ventures, modelled after Berkshire Hathway, sailed through in its second attempt, although its share subscription data put a question mark over its attractiveness at debut. The issue that was subscribed 1.5 times, 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 that was closed on Wednesday, 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 in spite of the issue coming virtually at par with the price band of just Rs 10-11 per share.
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.
Future Ventures was eyeing to raise 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 issue values the firm at 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 will fall to 9.5-10 per cent post issue. Promoters’ combined holding will drop down to around 31-32 per cent post-IPO while that of the ad-for-equity media investor Bennett Coleman & Co Ltd (that also has investments in Pantaloon) will see its 12 per cent stake drop to around 6.5 per cent, according to VCCircle estimates.
The company that 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 our earlier report