Reuters – Warburg Takes Control of Future Capital

Warburg Pincus has agreed to buy a controlling stake in Future Capital Holdings for nearly $100 million, helping the U.S. private equity firm to expand its presence in India’s financial services sector. Future Capital, which provides consumer and mortgage loans, said in a statement Warburg would initially buy a 53.7% holding from group company Pantaloon Retail.

(Reuters) – Warburg Pincus LLC has agreed to buy a controlling stake in Future Capital Holdings for nearly $100 million, helping the U.S. private equity firm to expand its presence in India’s financial services sector.

 

Future Capital, which provides consumer and mortgage loans, said in a statement Warburg would initially buy a 53.7 percent holding from group company Pantaloon Retail.

 

The deal at 162 rupees per share, or 18 percent premium to Future’s Friday’s closing price, would cost Cloverdell Investment, an affiliate of Warburg, about 5.5 billion rupees ($98.8 million). It would then make a public offer to the remaining shareholders.

 

Warburg would also inject 1 billion rupees of primary capital through a preferential allotment by Future Capital, the Indian company said.

 

Future Group, whose main activity is running hypermarket chains such as Big Bazaar, has been looking to exit its non-core businesses. The transaction would help slash the group’s debt by 43 billion rupees.

 

“It will bring down our debt to lower than 20 billion rupees,” a Future Group source said.

 

Future Capital, which has 47 billion rupees of assets, posted a 115 percent jump in net profit to 1.06 billion rupees for the fiscal year ended March.

 

The company, with a market value of $158.4 million, said Vice-Chairman and Managing Director V. Vaidyanathan would continue to lead the operations.

 

Morgan Stanley was the lead financial advisor to Pantaloon while Enam Securities acted as the co-advisor to Future Group.

 

Warburg Pincus, which manages about $40 billion globally, has invested about $3 billion in India, including in private sector lender Kotak Mahindra Bank.

 

Private equity companies invested $1.8 billion in India in 2011, almost unchanged from $1.7 billion the year before, according to Thomson Reuters data. They have invested about $800 million so far this year, the data showed.

 

Shares in Future Capital, which have risen 11 percent in since the start of the year, added more than 6 percent by 0840 GMT in a Mumbai market that was down 0.5 percent.