UBS maintains buy rating on Pantaloon Retail

MUMBAI: UBS has maintained a buy rating on Pantaloon Retail after the company said it will sell its stake in Future Capital Holdings to Warburg Pincus.

"We believe this sale will help deleverage the balance sheet and help PRIL (Pantaloon Retail) focus on expansion at its core focus area of food," said UBS analyst Sunita Sachdev in a note to clients. "We also believe this deal will be positive for sentiment on PRIL as investors can now look at PRIL's clear focus on its fashion and food segment."

Pantaloon shares rose 1.9% to close at Rs 151.20 on Tuesday. UBS has retained its price target for the stock at Rs250.

"We believe the top priority for PRIL is reducing the interest burden in order to retain profitability," said Sachdev. "Stake sale will result in a debt reduction of Rs 560 crore. This would lead to an upside to FY13E EPS of around 18%, excluding the impact from the Pantaloon sale to Aditya Birla Nuvo Limited."