A Most Talked Exit of 2012: Warburg & Future Capital Deal

  • Nisarg A Joshi Nirma University
  • Jay M Desai Gujarat University
Keywords: merger, acquisition, M&A, Future Capital, takeover


With the global economic turmoil and the added uncertainty that has ushered in the Indian regulatory scenario since the beginning of the year 2012, it was only obvious for the total number of M&A transactions in the first half of 2012 slipping down as compared to 2010 and 2011. Having said that, it is rather surprising to note that the vast potential of the Indian market is still attracting a large number of foreign investors willing to offer attractive exit prices to the Indian promoters.

 This paper deals with one of the most-talked about exits of 2012, which was initiated in June 2012 when Mr. Kishore Biyani (promoter of Future Capital Holdings Limited (“FCH”)), after his long haul negotiations with several private equity firms finally squared down to US based private equity firm Warburg Pincus to sell Future Group’s stake in FCH, a non-core financial business of the Future Group. The Deal was launched on June 4, 2012 with the execution of definitive agreements between Cloverdell Investment Limited (“Cloverdell”), an entity belonging to Warburg Pincus, FCH and the promoters of FCH whereby Cloverdell agreed to acquire up to 55.36%1 of the issued and paid up equity share capital of FCH from the Sellers. With the closing of the Deal Cloverdell acquired 68.40% of the Diluted Voting Share Capital of FCH for a total consideration of approximately USD 136.5 million.

 This paper attempts to probe deeper into the Deal, a multi-million dollar transaction which provides Warburg the opportunity to test its fortune in the financial services sector in India and Future Group the opportunity to de-leverage its balance sheet and take its retail plans ahead, thereby proving to be in the best interests of both the parties. We seek to analyze the legal, regulatory, tax, financing and few other commercial dimensions of the Deal.

Author Biographies

Nisarg A Joshi, Nirma University

Institute of Management, Nirma University

Jay M Desai, Gujarat University

B. K. School of Business Management, Gujarat University


1. All percentages mentioned in this paper are calculated on the Diluted Voting Share Capital.
2. Public Announcement, available at,
3. Detailed Public Statement, available at,
http://www.sebi.gov.in/cms/sebi_data/commondocs/futurecapital-detailedPS_p.pdf, under
Regulation 13(4), Takeover Code 2011.
4. Draft Letter of Offer, available at,
www.sebi.gov.in/cms/sebi_data/commondocs/futuredraftlof_p.pdf, under Regulation 16(1),
Takeover Coe 2011.
5. Letter of Offer, available at, http://www.sebi.gov.in/sebiweb/home/list/3/20/15/0/Letter-ofOffer
6. Diluted voting share capital means the fully paid-up voting equity share capital of Target after
factoring the shares allotted by conversion of CCPS, ESOPs in future.
7. As per Regulation 7(1) of Takeover Code 2011 total shares of the target company as of tenth
working day from the closure of the tendering period shall take into account all potential
increases in the number of outstanding shares during the offer period contemplated as of the
date of the public announcement.
8. The Takeover Code 2011 introduced the concept of ‘tendering period’ during the offer period.
Regulation 2(1)(za) of Takeover Code 2011 provides that “tendering period” means the period
within which shareholders may tender their shares in acceptance of an open offer to acquire
shares made under these regulations. Further, Regulation 18(8) of the Takeover Code 2011
provides that the tendering period shall start not later than twelve working days from date of receipt of comments from SEBI on the draft letter of offer and shall remain open for ten
working days.
9. Post offer advertisement under Regulation 18(12) in terms of Takeover Code 2011 dated
November 9, 2012.
10. http://www.business-standard.com/india/news/warburg%5Cs-open-offer-for-future-capitaldelayed/481890/
11. Regulation 2(b) of the Takeover Code 2011 defines “acquisition” as meaning, directly or
indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target
12. http://www.moneycontrol.com/annual-report/futurecapitalholdings/notes-to-account/FCH
13. FCHFPL application to the National Housing Bank for registration as Housing Finance
Company was under process. FCHFPL on June 20, 2012 provided intimation to the NHB for
the indirect change of control or change of shareholding,
14. http://www.warburgpincus.com/portfolio/ViewCompany,id,575.aspx
15. http://www.warburgpincus.com/portfolio/ViewCompany,id,575.aspx,
16. http://www.pantaloonretail.in/pdf/ar_2006_2007.pdf,
17. http://www.futurecapital.in/investments/broking-services
18. http://www.pantaloonretail.in/about-us/overview-retail.html
19. http://www.fvrl.in/about-us/overview-retail.html
20. May 10 2012, Future Capital may sell stake by month-end,
http://www.livemint.com/2012/05/10222719/Future-Capital-may-sell- stake.html
21. Investor Presentation Q1 FY13, Corporate Presentation – 30 June 2012, available at
22. http://www.dealcurry.com/20120511-Warburg-Pincus-To-Acquire-Majority-Stake-InFuture-Capital.htm
23. http://articles.economictimes.indiatimes.com/2011-11-18/news/30415187_1_pantaloonmultiple-retail-formats-big-bazaar
24. http://www.firstpost.com/business/future-ceo-vaidyanathan-talks-of-future-with-warburg-
25. 1 USD = 55.5155 (source: www.rbi.org.in) dated June 4, 2012.
26. NSE Corporate Announcement by FCH dated July 10, 2012.
27. Paragraph 30 of the DLO. Also see http://www.indianexpress.com/news/future-capital-exitsits-subsidiary-myra-mall-management/972637/
28. BSE Announcement, Sale of Loans given to Deccan Chronicle Group, August 3, 2012,
available at, http://www.bseindia.com/stockinfo/anndet.aspx?newsid=e48c0b74-d8d7-4542-
29. http://business-standard.com/india/news/future-capital-pays-for-deccan-chronicle039smess/181244/on
30. http://articles.timesofindia.indiatimes.com/2012-07-28/india-business/32906522_1_dchlfchl-vice-chairman-deccan-chronicle-promoters-pledge
31. http://www.business-standard.com/india/news/biyani-takes-over-rs-170-cr-loan-to-pushwarburg-deal/482286/
32. Vijaya Rathore, MC Govardhana Rangan, , Deccan Chargers sale: Whoever buys the IPL
team faces a complicated financial & legal process, September 8, 2012,The Economic Times,
available at, http://economictimes.indiatimes.com/news/news-by-industry/et-cetera/deccanchargers-sale-whoever-buys-the-iplteam-faces-a-complicated-financial-legalprocess/articleshow/16306883.cms
33. BSE Announcement, Sale of Loans given to Deccan Chronicle Group, August 3, 2012,
available at, http://www.bseindia.com/stockinfo/anndet.aspx?newsid=e48c0b74-d8d7-4542-
34. Notice of Postal Ballot, available at,
35. Section 47(x) of the Income-tax Act, 1961.
36. Regulation 8 (1) of the Takeover Code 2011: The open offer to acquire shares under
Regulation 3, 4, 5 and 6 shall be made at a price not lower than the price determined in
accordance with sub-regulation (2) or (3), as the case may be.
37. As of the date of the PA, the Acquirers and the PAC did not hold any shares in FCH. Further,
the Acquirers and the PAC or any of their directors have not acquired any shares of FCH in
the 12 (twelve) months prior to the date of the PA
38. http://www.thehindubusinessline.com/industry-and-economy/government
39. Notification S.O 482 E, March 4, 2011, under the said notification the enterprise, whose
control, shares, voting rights or assets are being acquired has assets of the value of not more
than Rs. 2.5 billion or turnover of not more than Rs. 7.5 billion has been exempted from the
provisions of section 5 of the Competition Act for a period of five years.
40. http://www.bseindia.com/corporates/Sast.aspx?scripcd=532938
41. http://in.reuters.com/finance/stocks/FCHL.NS/key-developments/article/2644891
42. http://www.hdfcsec.com/Market/BSE-NSE-Announcements.aspx?CoCode=28364
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