Reliance Retail Ltd has emerged as the most valued retailer in the country after parent Reliance Industries Ltd proposed a scheme that will allow the unit’s shareholders to exchange their stock for RIL shares.
Under this scheme, Reliance Retail shareholders will get one share of billionaire Mukesh Ambani-led RIL in exchange for four shares of the retailer, according to a notice posted on the company’s website.
The retailer said that it proposed the scheme as it had been receiving requests from the employees holding equity shares for providing them options for exit and liquidity.
This effectively means that Reliance Retail’s valuation would be about Rs 2.4 trillion ($33.6 billion), or a fourth of RIL’s market capitalisation of Rs 9.7 trillion.
This is double the Rs 1.2 trillion valuation of nearest rival Avenue Supermarts Ltd, operator of hypermarket chain D-Mart.
Kishore Biyani-led Future Group, which operates hypermarket chain Big Bazaar, supermarket chain Food Bazaar and electronics store eZone, is another prominent brick-and-mortar retailer in India. The total market value of five main Future Group companies, including Future Retail Ltd and Future Lifestyle Fashions Ltd, is around Rs 32,800 crore ($4.5 billion).
Aditya Birla Retail Ltd, which was once known to be a fierce competitor to these retailers, is lagging much behind at Rs 17,870 crore ($2.5 billion).
Reliance Retail is India’s biggest retailer by revenue, and Ambani is the country’s richest person. The company manages nearly 10,900 stores, spread over 24.5 million sq ft, in 6,700 towns and cities across the country.
In August, Ambani had said at RIL’s annual meeting of shareholders that the company planned to list the retail unit within five years. However, the share-swap notice shows that the retailer doesn’t have any plan for listing on the stock exchanges as of now.
Earlier this year, the retailer was said to be in negotiations with China’s Alibaba Group for a stake sale but the talks reportedly fell through due to differences over valuation.
E-commerce major Amazon was also reported to be in exploratory talks with Reliance Retail to acquire a stake of up to 26%. While that reported deal hasn’t made any headway, Amazon in August agreed to acquire a 49% stake in a Future Group unit that owns 7.3% of Future Retail. This gives the US-based company a 3.58% stake in the retailer.
Last month, the Competition Commission of India sought more information from Amazon about the planned acquisition.