You have raised an important point. People should be more concerned with EPS growth rather then sales growth. Mostly all of us take it as equal whereas it is not.
For companies that wish to grow at more then their RoE they can do so by only two options:
1) Take debt
2) Raise equity.
As shareholders of companies that are growing at more then the RoE we need to understand that a 80% plus growth is not possible unless the company goes in for a lot of debt (which is dangerous) or frequently dilutes equity. Normally since companies can raise debt at 11% the incremental RoCE should add to the bottom line but this strategy can cut you both ways.
I would not be much worried for an equity dilution as long as it happens through a Rights issue. But placements/ GDR dilute the shareholder's advantage.
But my sense is that pantaloon would do a stake sale in any of its subsidiaries combined with a mix of debt and equity.
For a company at a market cap of Rs 4000 crores it would be a tall order to raise Rs 3600 crore through equity alone.
Pantaloon needs about Rs 1800 crores for Working capital and another rs 1800 crore for long term expansion plans
Working capital needs are normally financed at 25% margin. That needs they need Rs 450 crores from here
Long term expansion funds can be distributed as 1.5:1 on debt equity that is they need Rs 720 crores as equity.
So the company needs about Rs 1170 crores (Rs 450 crores + Rs 720 crores) and not Rs 3600 crores as some people would suggest.
Out of this they could sell of some stake in their home business etc and try to add up some amount from internal accruals.
All said and done Pantaloon remains a very high risk high reward investment. Either you can lose 50
% of your capital from here or make at least 8 to 10 times the money. Sales in 2010 are expected to be 15 times of sales in 2006.
Risk comes from not knowing what you are doing and in this case if you are mentally prepared for that eventuality I do not think it would matter much