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Indian IPOs
>> Future Capital Holdings
Future Capital Holdings IPO Analysis 11 January 2008 Source: www.keynoteindia.net
Future Capital Holdings IPO details: Price Band: Rs. 700 - 765 per share Issue open between: January 11-16, 2008 Book Running Lead Managers: Kotak, Enam, J M Financial, UBS To List on: NSE and BSE Market Cap post-listing: Rs. 48.37 billion or $1.2 billion (based on the cap price) Highlights: Future Capital Holdings Ltd. (FCHL) is the financial services arm of the Future Group promoted by Kishore Biyani. Financial capital and human capital are critical resources for the financial services industry. - Fund-based financial services are capital intensive. FCHL’s balance sheet size has grown from Rs162Cr in FY07 to Rs297Cr in H1-FY08. - To augment its human capital base, it has hired top-quality talent from within India and abroad as well. FCHL has a unique business model built on the investing platform. It has 3 arms viz., Investment Advisory, Future Money (retail financial services) and Future Capital Research. The first two are profit centres, while the last, though a cost centre, is critical in idea generation and trend identification. Most of FCHL’s businesses are at very nascent stages, with major capital deployment in process. With a strong management team and aggressive expansion plans, we expect it to deliver a superlative performance going ahead. FCHL’s advisory business already has a presence across the real estate, hospitality and consumption related sectors. It has assets under advisory of over $1bn. Funds (with duration of 7-year and above) usually give returns during the last 2-3 years. Given the duration of FCHL’s funds, we expect profit taking in FY10. It plans to expand in new sectors viz. logistics for which it has already entered into a JV. PE funds invest in companies that are in early phases of business life cycle. India is an emerging economy and the underlying sectors viz., retail, real estate and hotels, for funds which FCHL advises are in a high-growth phase. The IPO is aimed at funding the consumer/personal lending of Future Money. Consumer lending business under Future Money faces competition from several established players. The short track record of the recently launched Future Money is also a concern. Warrants issued to promoters in May 2006 and June 2007, were converted @ Rs10 and Rs117.50 per share respectively, while a fresh issue was made to a promoter group entity @ Rs178 per share in September 2007. We expect to FCHL to be in the red in the current year, as Future Money is at a start-up phase. However, it is likely to book profits from FY09 onwards. With the funds being advised by the Investment Advisory arms likely to mature only over the next 3-4 years, contribution from that arm is not likely in the near future. However, in view of the strong management background and opportunities in the consumer lending space, we advise investors to invest with a medium term perspective. |
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