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Potential stake sale in Future Capital – Another positive trigger
An article in the Economic Times does not quote a company official, but says that series of recent developments has put
Pantaloon in a better position to divest its holding. Professional management is in place at the NBFC, bad loans are down to a
negligible level and capital adequacy has improved following consolidation within the group.
Future Capital closed the last financial year with net profit of Rs490mn and net sales of Rs3.73bn on a consolidated basis. Its
current market cap is around Rs9bn. In our target price, we attribute a Rs29 per share value to FCH.
While this is not new information in terms of the company wanting to divest its stake in the business, we see increasing signs
that company is looking to restructure the group as a pure-play retail company, which would reduce the need to invest capital
behind growing the non-core businesses, in our view. We see this move as another positive trigger for the stock to perform
from a medium-term perspective.
Valuation Methodology and Investment Risks: We value the core business at INR610/share. We value all the subsidiaries and support
businesses at 1x capital employed. The combined value for all the other businesses stands at INR74/share. After deducting net debt of
INR131/share, our price target comes to INR553. Risks - Retail sector is a leveraged play on the macro fundamentals in the country. Any
downward trend on the macro front presents downside risk to our numbers .
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Potential stake sale in Future Capital – Another positive trigger
An article in the Economic Times does not quote a company official, but says that series of recent developments has put
Pantaloon in a better position to divest its holding. Professional management is in place at the NBFC, bad loans are down to a
negligible level and capital adequacy has improved following consolidation within the group.
Future Capital closed the last financial year with net profit of Rs490mn and net sales of Rs3.73bn on a consolidated basis. Its
current market cap is around Rs9bn. In our target price, we attribute a Rs29 per share value to FCH.
While this is not new information in terms of the company wanting to divest its stake in the business, we see increasing signs
that company is looking to restructure the group as a pure-play retail company, which would reduce the need to invest capital
behind growing the non-core businesses, in our view. We see this move as another positive trigger for the stock to perform
from a medium-term perspective.
Valuation Methodology and Investment Risks: We value the core business at INR610/share. We value all the subsidiaries and support
businesses at 1x capital employed. The combined value for all the other businesses stands at INR74/share. After deducting net debt of
INR131/share, our price target comes to INR553. Risks - Retail sector is a leveraged play on the macro fundamentals in the country. Any
downward trend on the macro front presents downside risk to our numbers .
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