The retail business of Reliance Industries Ltd. is valued higher in the over-the-counter market than brokerage estimates as the shares have surged amid talks of a stake sale in the unit.
Reliance Retail shares are currently trading at Rs 1,200-1,250 apiece in the OTC market, according to Harshvardhan Roongta, founder of Roongta Securities. Given its equity of 499.06 crore shares, the valuation works out to Rs 5.98-6.23 lakh crore—or $79.9-83.3 billion. That compares with $70 billion estimated by CLSA.
Shares of the retail unit command a premium in the OTC market because of scarcity of these shares. They have also surged on the parent's plan to sell a stake in the unit. Reliance Industries proposes to sell a strategic stake in Reliance Retail Ventures Ltd., the holding company of Reliance Retail that the Mukesh Ambani-controlled group plans to list eventually. RIL owns 94.45% in Reliance Retail Ventures as of March.
We have received strong interest from strategic and financial investors in Reliance Retail. We will induct global partners and investors in Reliance Retail in the next few quarters.Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd. at 43rd AGM
To be sure, RIL shares too have surged as it sold stake in its digital and telecom assets to a clutch of investors including Facebook Inc. and Google.
Share Swap Unlikely To Go Through
Reliance Retail Ventures owns 99.93% of Reliance Retail. The remaining, or 35.77 lakh shares, is under the Reliance Retail Employees' Restricted Stock Unit Plan 2006 and 2007.
In December, RIL proposed a scheme of arrangement offering investors one share for every four held in the unlisted Reliance Retail. This scheme faced opposition as the swap ratio discounted the valuation of Reliance Retail to around Rs 380 per share based on the value of RIL's stock at the time.
At the shareholder meeting, the company agreed to make the scheme optional, to be implemented through the National Company Law Tribunal, instead of a mandatory swap. That give shareholders the option to retain Reliance Retail shares. The NCLT process is stuck due to the pandemic.
RIL shares have jumped over 41% year-to-date and 140% since March 23 to Rs 2,126 apiece. Given the 1:4 share swap, one Reliance Retail share is worth Rs 530 apiece at current prices. That still is a 135% discount to the current value in the OTC market.
This value is likely to dissuade investors from opting for the swap.
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