On Friday, Reliance Retail announced its plans to decrease the equity share capital, specifically the portion owned by shareholders other than its promoter and holding company.
Numerous retail investors, who acquired the stock through the unlisted market, expressed their concerns over substantial losses amounting to approximately 60%.
On Friday, a wave of astonishment swept over numerous retail investors as Reliance Retail, the prominent retail subsidiary of Reliance Industries Ltd led by Mukesh Ambani, announced a reduction in share capital alongside a payout of Rs 1,362 per share.
Several retail investors, who had acquired the stock through the unlisted market, expressed their dismay as they found themselves facing substantial losses amounting to approximately 60%. The grey market, where shares of a company are bought and sold outside official trading channels, emerged as the avenue through which these investors entered. To participate in the grey market, an investor must locate a local dealer who facilitates connections with potential buyers and sellers.
On July 4, 2023, the board of Reliance Retail sanctioned a proposal wherein the shares held by those shareholders will be cancelled and eliminated in accordance with the capital reduction plan.
According to a filing made by its parent company Reliance Industries, a payment of Rs 1,362 per share, determined through valuation conducted by two respected independent registered valuers, will be provided as part of the capital reduction process.
Through this capital reduction plan, Reliance Retail aims to become a wholly-owned subsidiary of Reliance Retail Ventures Limited (RRVL), enabling the company to streamline its businesses more effectively.
Currently, RRVL, as the promoter and holding company of Reliance Retail, possesses 99.91 percent of the company’s share capital. The remaining 0.09 percent, equivalent to approximately 78.65 lakh equity shares, is held by identified shareholders.
Reliance Retail intends to notify its shareholders regarding the capital reduction process. However, it is important to note that this capital reduction is subject to regulatory approvals, approval by the company’s members through a special resolution, and obtaining sanction from the Mumbai bench of the National Company Law Tribunal.
According to a source with direct knowledge of the matter, two global consultants have valued Reliance Retail at a range of $92-96 billion.
The company engaged the services of independent valuers, Ernst & Young (EY), who assessed the value at $96.14 billion, and BDO, who priced it at approximately $92 billion. The source, requesting anonymity due to the confidentiality of the information, provided these details.
The valuation by Ernst & Young translates to Rs 884.03 per share, while BDO Valuation Advisory LLP determined a price of Rs 849.08 per share. Reliance Retail is a wholly-owned subsidiary of Reliance Retail Ventures, which encompasses various retail operations, including international partnerships and the billionaire’s consumer goods business.
These valuations demonstrate the consultants’ belief that Ambani’s businesses are experiencing rapid growth. In 2020, Reliance Retail Ventures raised Rs 47,265 crore by selling a 10.09% stake, valuing the company at approximately $57 billion based on current exchange rates.
Notable investors during that time included KKR, the Saudi Public Investment Fund, General Atlantic, and the UAE’s Mubadala.
In recent years, Reliance Retail has forged partnerships with numerous global brands, facilitating their entry and expansion into the Indian market. These collaborations encompass a wide range of industries, including fashion, food, and more. Notable partner brands of Reliance Retail include Burberry, Pret A Manger, and Tiffany.
