Kishore Biyani-led Future Group today said it is selling a 53.67 percent stake in Future Capital Holdings to US-based Warburg Pincus to raise an estimated Rs 560 crore which, according to most analysts, is favorable for long-term investors of Future Capital.
Warburg will pay Rs 162 per share, an 18 percent premium to Future Capital's Friday closing price.
"As per the share purchase agreement, Warburg Pincus will inject another Rs 100 crore into Future Capital Holdings (FCH) and also make an open offer under Sebi's Takeover Code," a PTI report stated.
"There were talks before and Pantaloon Group was all set to monetise this particular stake sale. Now the news has been on since the last six months. So this is very much in line with Pantaloon's overall strategy," Sangeeta Tripathi, Research Analyst at Sharekhan, said.
"The price at Rs 162 appears to be really attractive from Pantaloon's and Future Capital's points of view," Tripathi added.
A.K. Prabhakar, Senior Vice President - Equity Research at Anand Rathi, is of the view that the deal is very positive for long-term shareholders of Future Capital Holidings. However, the stock may trade in the Rs 120-Rs 150 range in the short term as investors will not hurry to buy as an upside is limited.
"The stock upside will be capped around Rs 150 which would see lot of supply to come as Rs 162 is the price Warburg is paying," Prabhakar added.
Prabhkar advises investors to use any rally to reduce exposure to the counter as the short-term pressure is high on the stock since Pantaloon Retail is struggling.
"This deal is more or less in line with expectations. The open offer should see the share price in the range of Rs 145-155 for the next two-three months till the time the open offer has been completed," Jagannadham Thunuguntla, Equity Head at SMC Capitals, said.
"The upside for Pantaloon Retail is fairly limited on debt concerns. From Future Capital's point of view, because of the Rs 162 price and the open offer anticipation, the downsides are limited," Thunuguntla added.
"So, Rs 145-155 is the range that the stock will spend its time in the coming days till the time the open offer has completed. But in Pantaloon, a lot more repair work is needed," he said.
Pantaloon Retail holds a 55 percent stake in Future Capital and has debt of over Rs 5,000 crore. from economics times.