Future Capital Holdings stake sale: Merely market rumours?

Suparna / 07 Dec 2011

According to certain media reports received on Dec 7, 2011, retail entrepreneur Kishore Biyani was looking to exit his not-so-successful financial services arm, Future Capital Holdings (FCHL), with Hyderabad-based Deccan Chronicle as the prospective buyer.
According to certain media reports received on Dec 7, 2011, retail entrepreneur Kishore Biyani was looking to exit his not-so-successful financial services arm, Future Capital Holdings (FCHL). The reports quoted Hyderabad-based Deccan Chronicle as the prospective buyer of his flagship firm Pantaloons’ stake in FCHL for a total price consideration of around Rs 600-700 cr.

This development spread like wildfire in the early market hours, and the stock zoomed up by 3%-5% at the opening of the day’s trade. An hour into the morning session, the promoter group company, Pantaloon Retail, issued a clarification statement on the BSE refuting all claims of a stake sale by the company or the individual promoter, Kishore Biyani, in FCHL. Despite this, the counter continues to trade on a strong note amidst huge volumes, touching the day’s high of Rs 148.80 per share.

Simple as this appears to be – a counter rallies on market rumours and the management comes in to clarify about it – it is quite different in the case of FCHL. On a number of occasions in the past, the stock has been in the limelight on rumours of a stake sale or those of the exit of its JV, the Italy-based Generali.

Take, for instance, similar rumours circulating in the market in July 2011 – that the individual promoter Kishore Biyani, together with Pantaloon Retail, had hired Morgan Stanley and Merrill Lynch to plan an exit strategy from Future Capital Holdings. This development saw the stock rally by a good 33% in the same month.

Then, in the Sept 2011, fresh talks emerged on the streets that after conducting a thorough valuation of Future Group’s financial, insurance and logistics ventures at Rs 5000 cr, the group was in advanced stages of talks with certain PE giants and other interested players to divest its stake in the insurance and financial services arm. However, these reports of stake sale were soon met with hurdles over their valuations. While the Future Group was seeking valuations at Rs 2000 cr for its financial businesses, market experts valued the stake at Rs 1200-1500 cr. As a result of this fallout, the counter was beaten down by investors, and it tanked by 12% for Sept 2011.

Moving on to Nov 2011, the media reported that the group was in an advanced stage of discussion with Mumbai-based Industrial Investment Trust (IITL) to exit the life insurance JV that it operates with Italy’s Generali. Both the companies refused to comment on the issue, and hence, one cannot verify the authenticity of these reports.

Thus, the FCHL counter has historically been in the news with regard to either its stake sale or other JV exit news. We advise our readers and investors to refrain from latching on to such market-driven speculations with the aim to earn a quick buck.

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