Pantaloon's stake sale in co at final stage: Future Cap

In an interview to CNBC-TV18, V Vaidyanathan, chairman and managing director of Future Capital Holdings says, Pantaloon's stake sale in the company is at an advanced stage. “It’s the last stage is the best way to put it. You could look forward to some announcement sooner than later," he adds.

Commenting on the business, he says, the loan book is now close to Rs 4,700 crore. “Of the Rs 4,700 crore, about Rs 2,000 crore is the retail business and about Rs 2,700 crore is wholesale business. Retail is now 42% of the total business,” he asserts. He thinks margins are quite stable. "We are running at about 5%. We think it’s a sustainable at these numbers," he adds. Below is the edited transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: First a confirmation on that inter se promoter transfer, whether or not it was step one towards the sale that you guys have been talking about? How soon it could happen and whether it does indeed involve an open offer? A: Since the last time we talked, maybe about a month ago, discussions have progressed. Things are probably at an advance stage is the best way to put it. Q: Is it matter of days now before you can make a final announcement and end the suspense? A: If you look at this, it hasn’t been that much of a suspense because in some way or the other media has been speculating about the deal. Last time, we actually talked about it and I shared with you the details of that. So, I must say that things have progressed. It’s the last stage is the best way to put it. Yes, you could look forward to some announcement sooner than later. But really beyond that, I won't like to comment because it might even interfere with the process. Q: How is your business doing now? You have reported a 56% jump in total income. Are you facing challenges managing margins in this environment or things are okay? A: Things are okay for us. Since we came off of a small base, it wasn’t really very difficult to grow really in a percentage sense. But in an overall sense, now our loan book has become close to Rs 4,700 crore, which now gives us adequate critical mass to run a sustainable profitable franchise. Of the Rs 4,700 crore, about Rs 2,000 crore is the retail business and about Rs 2,700 crore is wholesale business. Retail is now 42% of the total business. So, one change that you are seeing in the company is that from 18% of the loan book being retail has now touched 42%. Secondly, as far as margins are concerned, I think it is quite stable, we are running at about 5%. We think it’s a sustainable at these numbers. Q: Is there a keenness to go ahead with an open offer as well that will involve minority shareholders? Will they remain any linkage between the Future Group and Future Capital, once the deal is done or is this a move to separate the two entities? A: The way it is conceptualised right now it is meant to be sale of a majority ownership of the Future Group. That means it could also entail in an open offer. But that’s the best we can say at this stage because the final contours are still being worked out. We should really wait for the details before they emerge. My sense is that we could have an announcement sooner than later. It’s on the cards is the best way to put it. But we’ll like to really hold it because nothing is really done, till it’s really done. Q: Given how your book splits up now by the end of FY12, how do you think things will pan out in FY13? What flows through to profitability because this time around income growth is very strong, but the profits are more muted? A: Last year, both income as well as profit came in tandem. If you see our numbers, our core income, which is basically net interest income plus fees, has actually grown from Rs 190 crore last year to Rs 346 crore this year, upward of 80%. That has actually translated directly to the bottom-line because the net profit has actually grown from Rs 50 crore to Rs 105 crore. So, it’s moved pretty much in tandem. Now, if you were to look fast forward this and figure out what the next year looks like, I would say that to an extent depends on interest rates. If interest rates begin to tend down, I think it just gives a boost to the sentiment and the impact because a large number of our customers are SMEs (small and medium enterprise). But to maintain a margin range of about 4.85% and to translate that to profitability should be a sustainable proposition. We should watch out for regulatory changes that are coming. That could impact the profits in a general sense, but overall it should be sustainable.