Biyani opts for holding company model, may raise Rs 1,200 cr.
In a major restructuring exercise, Kishore Biyani-promoted Pantaloon Retail — to be renamed Future Markets and Consumer Group — will become the holding company for two of its biggest divisions, which will be spun off and made fully-owned subsidiaries.
The retail and fashion divisions will be known as Future Consumer Enterprise and Future Fashion Merchandising, respectively.
The Pantloon board, which met today, also approved raising Rs 368 crore via preferential allotment. Pantaloon will issue 11 million shares for Rs 201.30 crore to the promoters and their associates at Rs 183 per share. In the second transaction, about 4.1 million shares will be issued to Dharmyug Investments for Rs 75.03 crore. The promoters and their associates would subscribe to five million warrants at Rs 91.50 crore with a conversion period of 18 months, the company said in a statement to the stock exchanges.
The promoters hold 46.50 per cent stake in Pantaloon.
However, sources close to the company said the two new companies would also bring in around Rs 1,200 crore through private equity investments.
The board also approved the appointment of Shailesh Haribhakti as chairman of the company. Haribhakti is currently an independent director on the board. Biyani is the managing director and chief executive officer.
The sale or transfer of the two divisions is subject to mandatory approvals.
The extraordinary general meeting of the company would be held on May 12 for obtaining shareholders’ approval for preferential issue of equity shares and warrants to promoters and investors, said the company.
The board also noted the cancellation of the balance 1,26,51,944 warrants for which the conversion option was not exercised until the last date, April 1, 2009.
The Pantaloon Retail stock went up by 8.04 per cent to Rs 184.70 before surging to an intra-day high of Rs 207.80 in anticipation of the board announcement.
The company had said in January that it would hive off four of its business divisions, including Big Bazaar and Food Bazaar, into independent subsidiaries, keeping the option open for listing them in future. While today’s decision involved two divisions, the company did not give any time-frame for the two other divisions.
Big Bazaar is the group’s hypermarket business and has 109 stores and Food Bazaar is a supermarket chain with 152 stores.
According to analysts tracking the company, the proposed fund-raising is expected to bring down the debt to equity ratio of company, which has been going up steadily, reflecting the increased borrowing of the company to fund its plans. The ratio has gone up from 1.17:1 in FY 2007 to 1.21:1 in FY 2008 and is expected to be around 1.40:1 in the current financial year, which ends on June 30 (the company follows the June reporting cycle).
As on June 30, 2008, the company’s debt went up 69 per cent per cent to Rs 2,767 crore compared with the same period in the previous year. The company’s market capitalisation has slumped 78 per cent to Rs 2,995.04 crore from its all-time peak on January 2 last year.
While sales went up by 31 per cent in the first six months of this financial year compared with the same period in the previous year, net profit was up 13.7 per cent in the same period.
