Kishore Biyani's Pantaloon Retail (India) Ltd has said that its board has approved a fundraising plan of up to Rs 1,500 crore through a range of instruments like a qualified institutional placement (QIP) or convertible instruments. India's largest retailer is looking to dilute up to 15 per cent stake even as the company's share price hit a 52-week low on Monday.
The decision comes as government is still some way from opening multi-brand retailing in the country. The government is considering allowing 100 per cent FDI in single-brand retail as against upto 51 per cent as of now. Although, a committee of top civil servants in July agreed to recommend to the cabinet allowing foreign firms to take a 51 per cent stake in multi-brand retail operations, it is not expected to happen any time soon.
This means the firm will have to rope in a financial investor rather than getting a strategic investor such as an international retail chain.
Pantaloon Retail said that it may look to raise the funds "through convertible instrument convertible into shares, debt instruments with attached warrants giving right to the holder of such warrants to subscribe for equity / class B shares, issue of equity / class B shares or any combination thereof to various investors by various means including public / private offerings and/or qualified Institutional placement and / or such other mode as may be permissible or any combination thereof."
Pantaloon Retail shares last traded at Rs 189.05, down 4.28 per cent at BSE on Monday in a weak Mumbai market. The scrip hit its 52-week low of Rs 195.7 during intra-day trade on Monday.
At the last quoted price, the firm is valued at Rs 3,802 crore.
Since the firm is looking to dilute only upto 15 per cent stake and scoop as much as Rs 1,500 crore, it is eyeing share issue at a much higher valuation.
Pantaloon reported over 24 per cent increase in consolidated net sales at Rs 12,211.7 crore but more than doubled its net profit to Rs 141.5 crore for the year ended June 2011. As of FY11, the company had debt of Rs 4,190 crore while cash on hand stood at Rs 100 crore. Kishore Biyani's Future Group holds a 44.92 per cent stake in the public listed company, around 30 per cent of which is pledged.
Recent reports have suggested that Japan’s convenience store chain Lawson Inc will buy 49 per cent stake in Pantaloon's food sourcing and manufacturing operations, while French retailer Carrefour is also one of the suitors.
"The company plans to monetise its non-retail assets over the next 12–18 months and deploy the funds received therefrom to reduce the debt burden. PRIL holds close to 1 million sq ft of land in Mumbai (Gulmohar Mills and Apollo Mills). It plans to gradually divest its stake in all non-core businesses (financial services, insurance and supply chain) and also sell some land parcels and focus completely on the core retail business. PRIL hopes to garner Rs 3,000–4,000 crore from these monetisation activities. The company aims to bring down its debt/equity ratio to 0.8/x from the current 1.4x over the next few years," said a recent report by ICICI Securities on the company.