Kishore Biyani has begun preparations for the great retail war of 2007 and beyond. He's planning to dilute equity in Pantaloon Retail's subsidiaries such as Future Media, Future Capital, Future Logistics and Central to fund his expansion plans. The equity dilution could be in the form of IPOs, preferential allotment or strategic sale.
Equity analyst Edelweiss Securities estimate that of PRIL's total requirement of Rs 4,500 crore, equity dilution would get the company Rs 1,000 crore. Quoting the company's internal projections, the research firm says that in all Mr Biyani's company needs approximately Rs 2,300 crore from external sources of which Rs 1,300 crore will come in the form of debt.
When contacted by ET, Mr Biyani confirmed plans for raising more capital in the coming months through stake dilution in some subsidiaries. “We have aggressive expansion plans and looking at raising capital through investments in Future Capital, Future Media and Future Logistics,” he said.
According to reports, ICICI Ventures and Kotak SEAF India have picked 15% and 6% stakes respectively in another PRIL subsidiary, Home Solutions Retail, bringing an investment of about Rs 120 crore.
Future Capital is another PRIL subsidiary that focuses on asset management and consumer finance. It manages two real estate investment funds (Horizon and Kshitij) and consumer-related private equity fund, Indivision.
It has plans to get into insurance, consumer credit and other consumer-related financial products and services in the near future. Future Media, for which PRIL is in talks with WPP for a strategic partnership, is a recently-launched venture that targets developing retail space and malls as an outdoor media option. Future Logistics deals in management of supply chain and distribution.
According to an internal research report on the company prepared by Edelweiss, Pantaloon's expansion plans are targeted at taking the group's total retail space to about 30 million square feet by the end of 2011 from the current 3.5 million square feet.
By the end of FY10, Mr Biyani is looking at 80 Pantaloon stores in various parts of the country from the current number of 23. Similar expansion is in the pipeline for Big Bazaar and Food Bazaar, where the company aims to take the number of stores to 225 and 250 respectively, growing from the current 35 and 53 respectively. Central is a chain of lifestyle retail stores.