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Apr 26, 2011, 05.51 PM IST
The Rs 750 crore IPO of Future Ventures, a subsidiary of the Future Group led by Kishore Biyani, will open for subscription on Monday, April 25. It is the second big IPO post the Muthoot Finance.
The price band is set at Rs 10-11 a share for the issue, which closes on April 27 for qualified institutional bidders and on April 28 for retail and non-institutional bidders.
In an interview with CNBC-Awaaz, Ashish Maheshwari of Globe Capital as well as Gaurav Jain, Director of Hem Securities advised subscribing the issue with long term perspective.
Both experts do not see any wealth creation in the short term as well as on listing.
With an eye-catching price tag, Investment Advisor SP Tulsian says, investors can apply for the issue as the share seems to have limited downside from face value while it has potential to be a low risk-high return bet, given Indiaís developing economy being fuelled by higher domestic consumption and Future Groupís expertise in retail.
Brokerages have mixed opinions on the IPO. KR Choksey has recommended avoiding the issue due to the lack of clear visibility on earnings in near to mid-term. However, Unicon Investment said one could subscribe to the issue, citing growth of consumerism & branded products.
KR Choksey said, "We believe the business model of Future Ventures is quite robust in the long term however there is no clear visibility on how the large part of proceeds will be deployed; they are likely to be invested in lower interest paying instruments. Since there are no strict comparables in this segment so peer comparison cannot be done. However, we believe the issue is attractively priced at 1.1 times 9MFY11 post issue book, at the upper band. Notwithstanding robust unique business model and compelling Indiaís consumption driven growth story, we recommend avoid the issue due to the lack of clear visibility on earnings in near to mid term."
Unicon Investment said, "FVIL would benefit from the growth opportunities available in the consumer sector. Also, FVIL enjoys the benefit of Future groupís experience in the retail sector and would add value to its business ventures. Besides, aggregation of investments in retail sector they would in due course be able top unlock value at higher premium from there investments. FVILís ability to successfully turnaround operationally & financially the business ventures, mobilize funds for providing the funding support to existing/new business ventures and profitably divest stake in its business ventures would eventually decide the success of FVILís unique business model. We believe some business ventures where they have invested have great potential going forward."
"Ventures like Aadhaar with long gestation period will reap the fruits in future of first mover advantage in rural retail space & be a part of rural consumption growth story. At the upper & lower price band the issue is priced at 1.2x & 1.1x of itís current book value. Considering the issue at face value, growth of consumerism & branded products one could subscribe to the issue," Unicon said.
Future Ventures plans to use a large part of the funds for acquiring new businesses and a small part of the proceeds will be used to grow the existing businesses.
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