Retail entrepreneur Kishore Biyani-led Future Group has filed documents to list its logistics arm on the stock exchanges. The issue comprises entirely of offer-for-sale by private equity firm SSG Capital and Future Enterprises.
The proposed issue will make Future Supply Chain Solutions Ltd the sixth Future Group firm in the public listed space. Future Retail, Future Consumer, Future Market Networks, Future Enterprises and Future Lifestyle Fashions are already listed.
VCCircle had first reported on June 8 that Future Supply Chain had picked bankers for an initial public offering (IPO).
It joins around a dozen companies awaiting a green signal from the regulator Securities and Exchange Board of India (SEBI) for their IPOs. Besides, another 10 firms are sitting with SEBI's approval to float their public issues.
Future Supply Chain had considered a listing two years ago, but subsequently decided to raise capital through private equity firms.
In February 2015, the company’s board announced that it planned to sell shares either via an IPO or a PE stake sale. Soon after, in April 2015, Future Supply Chain issued convertible debentures to GTI Capital for $8.5 million, as per VCCEdge, the data research platform of VCCircle.
In April 2016, Singapore-based distressed assets fund management firm SSG Capital acquired a 40% stake in Future Supply. This deal valued the company at Rs 1,450 crore.
Here’s a snapshot of Future Supply Chain’s IPO:
Issue: The IPO comprises an offer-for-sale by Future Enterprises and PE-backed SSG Capital. SSG is planning to sell 7.8 million shares, or half of its 20% holding, while Future Enterprises, which owns a 57.4% stake, will sell 5%. The issue is expected to be worth over Rs 500 crore, valuing the company over Rs 2,000 crore.
Advisors: Edelweiss, CITIC CLSA and Nomura are the global coordinators and book running lead managers for the IPO. IDFC, IIFL and Yes Securities are the other merchant bankers involved.
Cyril Amarchand Mangaldas is the legal adviser to Future Group and Future Supply Chain. Khaitan & Co and Latham & Watkins LLP are the Indian and international legal counsels to the merchant bankers for the issue. Trilegal is advising SSG Capital on the share sale.
Future Supply Chain is a third-party logistics operator for sectors like retail, fashion and apparel, automotive and engineering, food and beverage, fast-moving consumer goods, e-commerce, healthcare, electronics and technology, home and furniture and ATMs.
While it was originally established to provide supply chain and logistics solutions for Future Group, it has diversified its customer base over time. Revenues from clients outside the group accounted for 37.5%, 50.5% and 53.5% of total in FY2017, FY2016 and FY2015, respectively.
As of July 31, 2017, it ran contract logistics operations through 42 distribution centres across India, covering approximately 3.8 million square feet of warehouse space. It also operates two distribution centres, covering approximately 0.37 million square feet of warehouse space.
Its distribution centre at the Multi-modal International Hub Airport at Nagpur (MIHAN) is one of the largest among automated distribution centres in India. Its high-speed cross-belt sorter system became operational in July 2017.
The company employs a hub-and-spoke distribution model comprising 14 hubs and 105 branches across India, covering 11,228 pin codes.
As of July 2017, it operated approximately 590 containerised vehicles, including 256 GPS-enabled vehicles of which 144 were refrigerated (reefer) trucks. It also operates 9,529 pallets as a part of temperature-controlled logistics services.
The company’s revenues have grown at a compounded annual rate of 17.3% in the last three years. Growth, however, was slow in the year ended March 2017. Revenue from operations grew in single digits to Rs 561.18 crore from Rs 519.87 crore in the previous fiscal.
In the same period, EBITDA and net profit grew at a CAGR of 7.8% and 36.2%, respectively. EBITDA growth last year slowed to 6.1% and stood at Rs 74.28 core. But net profit growth shot up to over 55% to Rs 45.75 crore.
SSG Capital owns 40% stake in the company while GTI Capital holds preference shares that will give it a little over 2% in the firm ahead of the issue. GTI Capital had put Rs 55 crore into the company in 2015 while SSG Capital had put in Rs 515 crore to buy the stake just a year ago.
SSG Capital had bought the entire 26% stake held by Hong Kong’s Fung Capital and 14% stake from Future Retail and Future Supply Chain’s management team.