Private equity firm Warburg Pincus on Monday announced it will buy out all of Pantaloon Retail's stake in Kishore Biyani-promoted Future Capital in two tranches. It will also invest Rs 100 crore through preferential allotment.
"We are looking at selling the entire stake in Future Capital Holdings (FCH) to Warburg Pincus in two tranches. We will get an initial equity infusion of Rs 1,050 crore,' said Kishore Biyani, chairman and founder of the Future Group.
The deal is expected to result in debt write-offs of about Rs 4,000 crore, Biyani told NDTV Profit.
"Our focus is on reducing debt," Biyani said, adding that the group is looking to raise an additional Rs 560-570 crore in the near future. "Post the deal, the debt to equity ratio will be 1:1."
"The plan is to complete the full restructuring process by June 2013," he said.
In the first tranche, Warburg Pincus will buy a 40 per cent stake at Rs 162 a share and will pick up the rest at the same price in the second tranche.
Subsequently Warbug Pincus will make an open offer for another 26 per cent, likely at Rs 162 a share. The implied acceptance ratio for the open offer stands at 59 per cent.
The deal is subject to regulatory clearance and could take up to three months to process, including closure of the open offer, V. Vaidyanathn, vice chairman and managing director of Future Capital Holdings (FCH), told NDTV Profit.
"Rs 100 crore infusion will result in an equity dilution of 8.7 per cent, and Pantaloon will sell its remaining stake in the second tranche depending on the response to the open offer,” said Vaidyanathan, who will continue to head the company.
Pantaloon will get Rs 419 crore through the first tranche and another Rs 132.8 crore in the second. The stake sale is expected to reduce Pantaloon's debt from Rs 6,000 crore to Rs 5,450 crore.
Shares in Future Capital, which had traded with strong gains in a down market early Monday, were up 7.55 per cent at Rs 147.35 at 12:42 p.m., shortly after the announcement was made on the Bombay Stock Exchange. The broader Sensex was down 0.80 per cent at 15,837.66.
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