Shares of Pantaloon Retail, the country's largest listed retailer, rose 3.8 per cent after the company announced a plan to merge its subsidiary Future Value Retail with itself. On Monday, the Pantaloon stock closed at Rs 149, compared with Friday's close of Rs 143.55.
On Sunday, Pantaloon's board decided to merge Future Value Retail, which runs its hypermarket Big Bazaar and Food Bazaar stores, with itself. The company, however, did not share the details of the proposed merger. In 2010, Pantaloon had hived off its value retail business into Future Value Retail, with plans to sell stake or go public. Though it sold majority stake in its fashion business Pantaloons, the company has not divested any stake in the value business.
Future Value Retail operates 148 Big Bazaar and 169 Food Bazaar stores, among other formats, in about 70 cities across the country, according to its website. It also runs another retail brand, KB's Fairprice.
Analysts have welcomed the move. "It (the merger) will help the company have a leaner structure and reduce overheads in running separate companies," said Abhishek Ranganathan, research analyst with MF Global Sify Securities.
"After the sale of Pantaloon, Future Value retail is the main revenue driver for the company in the near term, with this segment accounting for bulk business. With Future Value Retail becoming a part of Pantaloon Retail, the major revenue-generating part would become a part of company," said Rahul Kundnani, research analyst (institutional equities, media and retail), SBICAP Securities. "It is an exercise to consolidate the remaining major business and running it as a single entity, without much of a financial implication," he said.
Pantaloon has also said it would demerge all businesses pertaining to the Pantaloon format and transfer these to Peter England Fashions and Retail (PEFRL). The board of Aditya Birla Group firm PEFRL had approved the demerger of the Pantaloon format business and fixed the share swap ratio at 1:5---for every five shares of Pantaloon, shareholders would get a Peter England share.
After the demerger, Aditya Birla Nuvo's stake in Pantaloon Retail, through its subsidiary PEFRL, would be 50.09 per cent.