Retail tycoon Kishore Biyani’s confidence in his group company, Future Ventures India (FVIL), is yet to rub on to investors.
Since its debut on May 10, the FVIL stock is yet to rise above Rs 10. Even efforts by Biyani-controlled Pantaloon Retail and PIL Industries to give confidence to investors by buying FVIL shares from the open market have not worked.
After the listing, the two have spent Rs 26 crore to buy 31.5 million shares, or 2 per cent stake, according to disclosures to stock exchanges.
However, the stock has not moved above its issue price of Rs 10. It closed at Rs 8.15 on Thursday, down 1.81 per cent, on the Bombay Stock Exchange (BSE). It has lost 18.5 per cent in eight trading sessions since listing.
Senior company executives are putting up a brave face. “The promoters had kept aside Rs 35 crore in an escrow account which has been used to raise our stake,” said Anand B, group CFO, Future group. “That the promoters are still backing the issue should be seen as a positive,” he said.
Analysts say there is nothing to worry about Pantaloon Retail using its money to buy shares of a group company. “There is nothing alarming about it. The latest investment in FVIL is not material for Pantaloon Retail, which has reported a net profit of Rs 50.54 crore from its core retail business for the quarter ended March 31,” said Varun Lohchab, an analyst at Religare Capital Markets.
Pantaloon Retail’s stake in FVIL has risen to 10.49 per cent while PIL Industries’ stake is 8.77 per cent. The overall holding of the promoter group has increased by 2 per cent to 33.13 per cent.
FVIL, which has been modelled on the lines of legendary investor Warren Buffett’s Berkshire Hathaway, raised Rs 750 crore in an initial public offer (IPO) by issuing 750 million shares. Despite being priced at face value, the issue was undersubscribed in retail and institutional investor categories.
Overall, it was subscribed 1.52 times, mainly due to non-institutional buyers like high net worth individuals, who bid for 7.69 times the shares reserved for them.
“The company should have waited for some time for the IPO,” said Deven Choksey, managing director at KR Choksey Shares & Securities. “It could have first sold shares to private equity players and hit the market after maturing of their brands. That would have given confidence to investors,” he said.
FVIL holds stakes in 13 companies.
