Will not part with 7.5% stake in Future Cap: Vaidynathan

The Future Group has decided to sell its stake of 54% in Future Capital Holdings in two tranches. The first tranche of 40% will be sold followed by an open offer of 26% by Warburg Pincus at a price of Rs 162 a share. This will give Future Group an equity value of Rs 1,050 crore

V Vaidynathan, CMD, Future Capital Holdings explains to CNBC-TV18's Kritika Saxena the details regarding the sale of stake to Warburg Pincus.

"Warburg has a great track record in India and has invested over a USD 3 billion in the country. Many of their investments have been successful and that has given them the confidence to continue to invest more in India. Their infusion of Rs 100 crore will add to the tier-I capital of Future Capital which will issue compulsory convertible preference shares convertible to equity any time 18 months from now," said V Vaidynathan.

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Vaidynathan holds about 7.5% in Future Capital, but affirmed that he had no plans to sell stake to Warburg Pincus or even tendering through the open offer.

Vaidynathan explains how Warburg Pincus was selected for the sale of stake in Future Capital. "Morgan Stanley  aided us significantly in identifying potential prospects. Though Warburg Pincus was not the first on our radar, they showed increased interest after we explained the prospects of the company – the company is still growing with a large network of branches and a loan book of over Rs 4,700 crore."

Also Read: Future Capital stake sale to help Pantaloon cut debt

Vaidynathan adds that Warburg will have two seats on the board after Pantaloon makes an exit. Currently around 48% of Pantaloon's stake has been sold off to Warburg Pincus to be followed by an open offer. Vaidynathan throws light on whether Pantaloon Retail's stake of 53% will be tendered in the open offer.

Also Read: Warburg Pincus deal to reduce debt ratio: Kishore Biyani

"The stake is actually 40%, not 48%. Depending on the subscription in the open offer, the differential between 26% and the amount that is actually subscribed is an amount that can actually be taken from Pantaloon Retail for the balance. Pantaloon Retail will still end up having after the sale of 40%, about 13%-14% of the stake."