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Biyani’s Future Ventures IPO…First you seduce at an obscene premium…and then now you seduce at Par !

Recent Past Pedigree Problem


Biyani’s ‘Future Ventures’…First you seduce Investors with a Future Capital Holdings IPO at an obscene premium…and now you seduce them at the other extreme with the Future Ventures IPO at near Par !

 In January 2008,just before Reliance Power seduced Investors at an obscene premium,Biyani’s Future Capital Holdings (FCH) seduced Investors with an IPO at Rs 765 !…just over three years down the line it has collapsed 80% to Rs 160 thereabouts…legal…yet criminal ! 

 Investors saved from FV IPO at a heavy Premium in 2008

And if Biyani had had his way he would have launched the IPO of even Future Ventures (FV) in  2008 in an attempt to gather Rs 2000 crs in it !…Rs 1500 crs would have been brought in by Promoters….probably monies from other Future Group Companies and in all probability from the IPO proceeds of FCH !……surely even the FV IPO  would have been at an obscene premium too….after FCH IPO, an EGM was called in early March 2008 to raise the Authorised Capital of Futures Ventures to Rs 5000 crs ! to pave the way for the IPO 

FV IPO Size now is for Rs 750 to Rs 825 crs in a bookbuilding range of Rs 10 to Rs 11…methinks this range is rather silly and senseless and it should have been a Fixed Price IPO

What will FV do ?

Biyani is resting on way past laurels with Pantaloon and Big Baazar

His own businesses are simply tight on cash and margins and lack of any fresh sustainable thrust in revenues and profits…SACH !….Oh ! that’s also the new brand of Products launched in 2008 in a venture with Sachin Tendulkar ! 

So now Biyani wants public monies in FV to invest in other businesses !…”trust my business and investment acumen” he seems to say…..however his own partner,with who he parted ways,Sameer Sain,ex Goldman Sachs raised questions on this….they both did not see eye to eye with each other on the business model to take the Future group forward

So should we trust Biyani and his FV ? 

FV is a book building Issue of 75 crore shares of Face Value Rs 10 at par of Rs 10 to Rs 11…it has opened today…however there are no Anchor Investors….unlike last weeks full subscription in the Anchor Investor quota of 30% of the 50% QIB Portion of the heavily oversubscribed IPO of the other Systematically Important Non Deposit taking NBFC,Muthoot Finance Ltd

Interestingly Future Ventures has no real Investment Team…it is headed by Kishore Biyani himself with a few employees,none of them are really key…what FV has disclosed is that plans to leverage on the expertise of Future Group skills….While FCH has no investment in the shareholding of FV it has a Consultancy and Advisory Agreement signed with it from August 10,2010 for a period of three years

So only if you really have faith that Biyani can rekindle the 1990s and early 2000 magic of Big Baazar and Pantaloon in FV,should you apply in the FV IPO….it is remarkable and rather uncanny that in this age of Premium,we are getting a big IPO from a known group at par  or near !…perhaps that is the only consolation

The RJ Connection

Interestingly in 2008 Utpal Seth features as one of the Top Ten Shareholders in FV…he holds 1.5 crs shares…yet does….he is the representative of Rakesh Jhunjhunwala’s Rare Enterprises…Rakesh was earlier on the board of directors of FV

Biyani & his Future Ventures and Warren Buffett  & his Berkshire Hathaway…same objective but Proof is in the Pudding and it lies in the Eating !

Someone brought in a comparison of intent between Biyani and his Future Ventures and Warren Buffett and his Berkshire Hathaway…of making successful Investments and rewarding shareholders with huge capital gains in the years to come…..Well,all I can observe here is that Warren Buffett’s Berkshire Hathaway stands as an Investment Icon and  Beacon after four decades of patience,conviction and concentration in proper selections…and Warren Buffett is 80 years old….Kishore Biyani is 50 and should we understand that he will be 90 before Future Ventures comes anywhere near being an Investment Icon if it has made the right selections !? 

What is the likely Trend of FV Share Price on Listing ?

Rs 9 to Rs 12 range…..Being positioned as an Investment Company,FV’s share Price on Listing and after will follow it’s Book Value,after adjusting for mark to market or individual valuations of each of its holdings with a suitable haircut….Right now pre IPO the book value is below par…likely to remain at par for some time as it will take a few years for it’s Investments to bear fruit and for FV to realise them by exiting them…Being a new Venture and an IPO at near Par there are no meaningful beginning Reserves.The Pre IPO Equity which is Rs 826 crs will move to Rs 1576 crs with the IPO…Opening Book Value will remain at or just under par Rs 10….akin to sale or listed prices of units of Equity Schemes of Mutual Funds being related to the NAV  

Any Scope for Share Price Manipulation ?

Yes….It’s a near Par Issue…..Problem I visualize is the randomness  and the  scale of share price manipulation that FV’s Nature of Business offers…with some helping hand from the Media,broking houses and analysts with vested interests,valuation excitement for one or more of FV’s Investments may be cooked up for seduction…this will translate into making suckers of investors in the secondary market in the times to come and unjustifiably seduce them into buying shares at highly cooked up prices…no guess for who the sellers would be ! 

So should you trust your Future with Future ?

Intuition and Emotion guides me to give Biyani a chance again !…probably an issue at par from him is his way of asking for forgiveness for the obscene FCH IPO pricing and the subsequent erosion…perhaps it was the only way he could seduce Investors to give him a chance yet again !

However,Rational Sense and Reason guides me to look at Future Ventures only in the Future…when promises are seen to be kept…..not now ! 

Ofcourse those who have been severely burnt in Biyani’s earlier FCH IPO issue or after having being seduced or invested at high prices in the secondary market may have a different take….I cannot reproduce verbatim on my blog their hardcore emotions on Biyani and rationally too they will simply have nothing more to do with him or his Future group  

So what shall it be ?…Emotion or Reason !?

Skip the IPO…this Choice between Emotion and Reason is not worth making now…we’ll assess FV in the secondary market when indicated

Wonder whether Emotion,Relationship or Reason guided RJ when he invested a few years ago in FV !

Cheers !



3 thoughts on “Biyani’s Future Ventures IPO…First you seduce at an obscene premium…and then now you seduce at Par !”

  1. Biyani is becoming Anil Ambani in swindling investors money 🙂

    Way to go…

    I will be really really surprised if Biyani is able to turn his retail venture (Pantaloon) a big success in India. They are just 6000crs in mcap with loads of debt.. No way near the scale he is imagining..

  2. Pingback: Warburg Pincus acquires Future Capital Holdings at Rs 162 | Gaurav's Blog

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