To reduce its mounting debt, Future Group has decided to sell a 54 per cent stake in Future Capital Holdings to US-based private equity major Warburg Pincus.
Its board approved the sale on Monday. The deal would cost Cloverdell Investment, an affiliate of Warburg, about Rs 560 crore (Rs 5.6 billion).
According to the agreement, Pantaloon Retail India, along with its wholly owned subsidiary Future Value Retail, would sell its stake in FCH.
The deal is proposed at Rs 162 per share, an 18 per cent premium to Friday's closing price.
FCH scrip closed at Rs 143.55 on the Bombay Stock Exchange on Monday, up 4.78 per cent over Friday's close.
Warburg Pincus would buy a 40 per cent stake in the first tranche and 14 per cent in the second.
Subsequently, it would make an open offer for the remaining stake.
The company would also infuse Rs 100 crore (Rs 1 billion) of primary capital through a preferential allotment by Future Capital, said a company statement.
At present, the debt on Future Group's books stands at Rs 5,800 crore (Rs 58 billion).
The stake sale to Warburg Pincus would help Future Group reduce its debt by Rs 4,300 crore (Rs 43 billion),
This is the debt-ridden Future Group's second stake sale. Earlier, it had sold its apparel and fashion businesses chain, Pantaloon Retail, to Aditya Birla Nuvo for Rs 800 crore (Rs 8 billion).
Kishore Biyani, Future Group's founder and chief executive, said, "This transaction is in line with our stated intention to exit the non-core businesses of Pantaloon Retail.
"It is also aimed at deleveraging and further strengthening the company's balance sheet."
V Vaidyanathan, vice-chairman and managing director of FCH, would continue to head the company, while Vishal Mahadevia, managing director of Warburg Pincus, would be inducted into the company's board.
This is Warburg's second deal in the financial services segment this year.
In March, along with International Finance Corp, it had invested $50 million in non-banking financial company Au Financiers (India).
With more than $30 billion of assets under management, Warburg Pincus has invested about $3 billion in India so far.
In India, companies it has invested in include Ambuja Cements, Bharti Airtel, DB Corp, Diliigent Power, Gangavaram Port, Havells, HDFC, IMC, Kotak Mahindra Bank, Lemontree Hotels, Max India, Metropolis Healthcare and WNS Global Services.