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Mar 01, 2013, 07.44 PM IST | Source: CNBC-TV18

Budget Analysis: Mauritian route confusion may have dragged stock: Pantaloon

The recent correction in the Pantaloon stock could have been caused due to selling by Mauritian investors following confusion created by P Chidambaram's proposal in the Budget 2013-14 that appeared to target tax treaties, Rakesh Biyani, Joint MD, Pantaloon told CNBC TV18.

The recent correction in the Pantaloon Retail  stock could have been caused due to selling by Mauritian investors following confusion created by P Chidambaram's proposal in the Budget 2013-14 that appeared to target tax treaties, Rakesh Biyani, Joint MD, Pantaloon told CNBC TV18.

Along with many other mid-cap stocks Pantaloon stock crashed significantly in past few sessions. 

Also read: Budget 2013 will not impact India's sovereign ratings according to S&P

"I don't think there is any technical problem. Markets overall have been weak and considering the fact that there was some confusion related to the Mauritius route," Biyani said.

The company presented its first ever stand-alone quarterly loss on Monday. The retail company reported standalone loss of Rs 20.41 crore for the quarter ending December 2012 on account of a provisioning made for investment losses in some recent businesses.

Biyani however stressed that fundamentals of the business remains good and Budget 2013-14 has also provided good thrust to apparel industry with zero excise duty regime.

Below is the verbatim transcript of the interview.

 Q: First, is there any technical problem with any pledged stock which has come into the market or any holder of your stock who has been selling aggressively because it is unusual to see your stock lose so much ground in just a span of two or three days?

A: I don’t think there is any technical problem. Markets overall have been weak and considering the fact that there was some confusion related to the Mauritius route etc, maybe that has had an impact. However, if one looks at the business fundamentals, the last quarter even though we landed up reporting a loss but overall sales numbers were back on track, and in the current quarter the volumes are building up.

In yesterday’s Budget, the only industry which was given some relief was the apparel industry and the apparel industry is a significant share of our sales. Now, with back to the zero percent excise duty regime, it will give a big boost for our volumes to grow. Our volumes had taken a bit hit due to the maximum retail price (MRP) based regime that was existing.

We are all very excited with the kind of changes that have been announced for the apparel industry and specifically, considering the fact that we are in the process of creating Future Lifestyle Fashion, which is completely dedicated towards the fashion business.

Q: Just to go back to the technical point because it is important for your minority investors, you are saying none of the promoter or promoter group companies have any amount pledged if you do could you just walk us through the details of how much is pledged and with which entities?

A: There will be no change in the pledged numbers and the pledged numbers were just declared. As a usual pattern it is completely listed on the stock markets and are declared directly to both the exchanges. There has been no change in that number at all.

Q: Just another issue which might have come in the way of your stock performance yesterday is that the finance minister made some clarifications on 10 percent plus holdings being classified as foreign direct investment (FDI) and below 10 percent as foreign institutional investor (FII). One of your investor, Arisaig Partners holds very close to 10 percent which may have led people to believe that, that maybe classified as FDI thus limiting the headroom available for other strategic investors, can you clarify that point?

A: Even now the rules say that FIIs are only permitted up to 10 percent of a stock and Arisaig is well within that percentage point. What the finance minister did announce is the fact that there will be more clarity being provided by Sebi, over the regulations of FDI, FII and how the entire forex exposure in any company would be controlled but that is supposed to happen subsequently happen.

FDI is now permitted up to 51 percent whereas FII is being restricted up to 24 percent currently. I would believe that as Sebi dwells into it and there is going to be focus in allowing more foreign capital to come in, the FII limits overall would move towards the overall FDI limit subject to a cap of 10 percent per FII.

Future Retail stock price

On November 24, 2014, Future Retail closed at Rs 89.80, down Rs 4.3, or 4.57 percent. The 52-week high of the share was Rs 147.85 and the 52-week low was Rs 63.30.


The company's trailing 12-month (TTM) EPS was at Rs 2.05 per share as per the quarter ended September 2014. The stock's price-to-earnings (P/E) ratio was 43.8. The latest book value of the company is Rs 117.46 per share. At current value, the price-to-book value of the company is 0.76.

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