IPO Update: FVIL

Future Ventures India Ltd

Price band: Rs10-11 per share

Issue opens: April 25, 2010

Issue closes: April 28, 2010

Bid Lot : 600 shares

Company and Promoters

Future Ventures India Ltd. (FVIL) is part of the reputed Future Group, led by eminent Mr Kishore Biyani. FVIL is regulated by RBI as a systemically important non-deposit accepting NBFC which invests in businesses with prime intentions to participate in consumption-led sectors in India, defined as sectors whose growth and development will be determined primarily by the growing purchasing power of Indian consumers and their changing tastes, lifestyle and spending habits.

G. N. Bajpai, is the Chairman of FVIL. He holds Master degree in Commerce and Bachelors degree in law. He has previously been the Chairman of SEBI, LIC of India and the Chairperson of the Insurance Institute of India.

Issue Highlights

ü  At an earlier stage, India has entered a virtuous long term cycle in which rising incomes lead to increasing consumption. India’s GDP is expected to double within 2015; favorable demographic conditions (32% of population between 20-39 years; having high consumption potential) and exploding city populations are propelling consumption. Players focusing on such growth stories like FVIL; are expected to significantly benefit going forward.

ü  FVIL is expected to significantly benefit from its rich parentage. Synergy benefits from the group companies are expected to aid the business ventures in strategizing and chartering growth plans.

ü  FVIL has seen exponential income growth over past 3 years. Total Income has grown at a CAGR of 487%; during the period FY08 - FY10. Moreover the company has turnaround its operational performance and has reported EBITDA of Rs 13.8 cr as on 9M FY 2011 as compared to losses during past 3 years.

ü  CARE has assigned a grade of 3/5 for the FVIL IPO indicating average fundamentals.

Positives

·         Riding on the consumption story: Consumption has played a bigger role in India’s growth story than in other developing countries in Asia. At an earlier stage, India has entered a virtuous long term cycle in which rising incomes lead to increasing consumption, which, in turn, creates more business opportunities and employment, further fueling GDP and income growth.

Factors that will drive Private Consumption:

a.    India’s GDP is poised for an average growth of 8-9% which will fuel private consumption. GDP is estimated to be US$ 1,777 bn and consumption is set to double by 2015.

b.    72% of Indian population constitutes of people below 39 years, with 32% between 20- 39 years having high consumption potential.

c.    By 2021, there may be more than 125 cities having population in excess of 1 mn and another 500 having population between 5,00,000 and 1 mn which will offer significant opportunities in the consumption space.

·         Synergies with Future Group will aid business growth and improve operational efficiencies

·         Business Ventures are not just pure financial investments; it provides access to a wide range of resources within the Future Group.

·         Exponential income growth; EBITDA turnaround in 9M FY 2011

Risk factors

·         FVIL’s revenue, net income and cash flow will be highly variable because financial results will be affected by the timing of their exit from any of the Business Ventures, which may make it difficult for them to achieve steady earnings growth and may cause the price of equity shares to fluctuate. The timing and receipt of income and gains generated by the sale of Business Ventures is event-driven and thus highly variable which will contribute to the volatility of FVIL’s revenue.

·         A significant proportion of FVIL’s investments in the Business Ventures will involve acquiring securities that are not publicly traded. In some cases, FVIL may be prohibited by contract or by applicable securities laws from selling such securities for a period of time. Company’s ability to dispose of investments in these Businesses is also dependent on the financial markets. If FVIL is unable to liquidate investments on a timely and opportune manner; company may be unable to participate in other more lucrative opportunities, which may have a material adverse effect on its business strategy and results of operations.

For additional information & risk factors please refer to the Red Herring Prospectus