Analysis of Public Issue of Future Ventures India Ltd

Table of Contents
Executive Summary....................................................................................................................................... 2 The Company : Future Ventures India Ltd .................................................................................................... 3 Salient Features of Public Issue .................................................................................................................... 5 Intermediaries ............................................................................................................................................... 6 Issue structure .............................................................................................................................................. 6 Financial Planning & Growth Projections ................................................................................................... 7

Executive Summary
This paper talks about Future Ventures India Ltds IPO prospect. It is brainchild of Mr. Biyani for upcoming ventures based on consumption story. It is a pure investment company. It has invested in subsidiaries of Future groups as well as independent ventures. The future group expertise is the most important factor for mentoring various new ventures after investment. Given the nature of the company and lack of clarity on further investment portfolio the IPO would be a risk-reward trade off.

The Company : Future Ventures India Ltd

The Company was incorporated on July 10, 1996 under the name Subhikshith Finance & Investments Limited. In 1998 the company was granted a certificate of registration by the Reserve Bank of India to carry on the business as an NBFC. In 2007, Subhikshith Finance was acquired by Future Value Retail Limited, after which the name was changed to Future Ventures India Limited (FVIL) in 2007. Future Ventures India Ltd is part of Future Group. Some of the businesses of the group include Future Capital Holdings (FCH), Future Generali Insurance, Future Supply Chain, Future Agrovet, Future Media, Future Brands, Future Bazaar, Pantaloons, Central, Big Bazaar, Food Bazaar, Home Town and Ezone). FVIL seeks to create, build, acquire, invest in and operate innovative and emerging businesses in growing consumption-led sectors in India, the sectors whose growth and development will be determined primarily by the growing purchasing power of Indian consumers and their changing tastes, lifestyle and spending habits. Within the consumption-led sectors, Future Ventures has primary focus on opportunities in the business segments of: Fashion FMCG Food Processing Home Products Rural Distribution and Vocational Education

The company has 14 Business VentureS out of which 6 are Subsidiaries: Aadhaar Retailing Limited Future Consumer Enterprises Limited Future Consumer Products Limited Indus-League Clothing Limited Indus Tree Crafts Private Limited Lee Cooper (India) Limited AND Designs India Limited BIBA Apparels Private Limited Capital Foods Exportts Private Lim Holii Accessories Private Limited Amar Chitra Katha Private Limited SSIPL Retail Limited Celio Future Fashion Limited Turtle Limited

Future Ventures was originally incorporated as Subhikshith Finance & Investments Ltd on July 10, 1996. The RBI granted a certificate of registration dated March 9, 1998 permitting the company to carry on the business of a NBFC as a non-deposit taking company. On July 14, 2007 Pantaloon Future Ventures Ltd (PFVL) (name has been changed to Future Value Retail Ltd on November 16, 2009) the wholly owned subsidiary of Pantaloon Retail (India) Ltd acquired 2,93,700 equity shares of face value Rs. 10 each, constituting 100% of the total issued, subscribed and paid-up share capital of Subhikshith through a share purchase agreement dated July 3, 2007 between PFVL, R Sankar, V Thirumalai and Subhikshith. In consideration of the purchase, PFVL paid an aggregate sum of Rs. 58 lakh to R Sankar and V Thirumalai. Pursuant to the acquisition, Subhikshith became a wholly owned subsidiary of PFVL. The company changed its name to Future Ventures India Pvt Ltd through a special resolution passed at the EGM of the company held on July 19, 2007. Future Ventures, a part of the Future Group, is a business group led by Kishore Biyani, focusing on consumptionled businesses in India and is also one of Indias leading organised multi-format retailers. The company seeks to create, build, acquire, invest in and operate innovative and emerging businesses in growing consumption-led sectors in India. These are sectors whose growth and development will be determined primarily by the growing purchasing power of Indian consumers and their changing tastes, lifestyle and spending habits. Within consumption-led sectors, the company intends to focus primarily on opportunities in the business segments of (i) fashion, (ii) FMCG, (iii) food processing, (iv) home products, (v) rural distribution and (vi) vocational education. Future Ventures intends to exercise operational control or influence the business ventures that it promotes or in which it acquires interests. In addition to allocating and providing capital, the company intends to create, operationally manage and strategically mentor these businesses. As on the date of the RHP, Future Ventures has 14 business ventures, six of which are its subsidiaries. The company intends to be a long-term owner, operator and/or partner of the business ventures and seeks to create value as an active shareholder by deploying the consumer insights, operating skills and capabilities available to it as a part of the Future Group. The management seeks to access opportunities at various stages of the enterprise growth cycle, from nascent to more mature businesses, with a view towards medium to long-term value creation for its shareholders.

Pantaloon Retail (India) Limited, along with other arms of the Future Group, is expected to assist the company in providing mentoring to the business ventures, to actively assist their strategic growth and business development plans. Additionally, it has entered into a consulting and advisory services agreement with Future Capital Holdings Ltd under which it will, among other things, support resource mobilisation in investee companies, advise on mergers and acquisitions and exit strategies and provide research services in relation to treasury assets. Future Ventures has also entered into a master service agreement with Future Corporate Resources Ltd for providing support and other services related to business activities, such as governance, risk mitigation, human relation policies and information technology, guidance regarding corporate and legal compliance and advice on fund raising.

Salient Features of Public Issue

Size of the issue FVIL proposes an initial public offering of Rs. 750 cr through 100% book building process. Issue size No. of Shares offered @ Rs. 10 -11 Face Value Lot size No of shares and multiples : : : : Rs. 750 cr 75 cr to 68.18 cr Rs. 10 600

Intermediaries
Book Running Lead Managers Enam Securities Pvt. Ltd. JM Financial Consultants Pvt. Ltd. Kotak Mahindra Capital Co. Ltd. Registrar to the issue : Link Intime (I) Pvt. Ltd.

Issue structure
At least 50% of the net issue to public shall be available for allocation on a proportionate basis to Qualified Institutional buyers. In addition, 5% of the QIB portion (excluding Anchor investor portion) shall be available for allocation on a proportionate basis to mutual funds only and the balance shall be available for allotment on a proportionate basis to QIBs and mutual funds. Further, not less than 15% of the net issue to public shall be available for allocation on a proportionate basis to Non-Institutional bidders and not less than 35% of the net issue to public shall be available for allocation on a proportionate basis to Retail Individual bidders. No of shares (at upper price band) QIBs portion (minimum) Non institutional portion (minimum) Retail portion (minimum) : : : : 68.18 cr 34.09 cr 10.23 cr 23.86 cr Rs. 1,576.24 cr. - 1,508.06 cr.

Post Issue Share Capital @ Rs. 10 11 :

HAREHOLDING PATTERN

Share holding pattern

Pre issue No of shares 490638700 335605000 0 826243700 % of share 59.38 40.62 0 100.00

Promoter & Promoter group Non Institutions Public Total

Post issue @ Rs. 10 / share No of shares % of share 490638700 31.13 335605000 750000000 1576243700 21.29 47.58 100.00

Post issue @ Rs. 11 / share No of % of shares share 490638700 32.53 335605000 22.55 681818181 45.21 1508061881 100.00

Financial Planning & Growth Projections

Company is an investment company. Future Venture do not have confirmed investment opportunities and hence usage of capital proceedings from the issue has not been specified. Given the format of the company investor would treat this like venture capital investment, higher risk higher the returns. For cash-flow analysis we take current portfolio as standard portfolio mix over a horizon of 5 years. Company is relying on Indias consumption story. Currently company is into 4 segments, Fashion, Food, Rural Distribution and Edutainment.
2% Fashion 12% Food Rural Distribution Edutainment

30%

56%

Aggregated growth rate has been mentioned in companys annual report for the sector and we would attach the same growth rate on a conservative side. Sector Growth Projections Fashion 13% Food 12% Rural 5% Distribution Edutainment 11%*
*Edutainment Growth -http://www.afaqs.com/media/story.html?sid=30057

We need to take weighted average to get the projection growth of the firm. Weighted Average growth would be 11.7% Companys all holding are in shares and investment of the capital is the only activity. So, resultant cash flows are the returns from the investments. We can assume the book value of the share 11 as current value. Over a period of 5 years valuation of Future venture comes as Growth for next 5 years - 11.7% Economic Growth 7%

Value of the Share Rs. 13.83 (against book value of 11)

@ offer price band of Rs.10-11 the share is undervalued