The board of Reliance Retail, a subsidiary of Reliance Industries, has approved a proposal to reduce the equity capital held by non-promoters and plans to buy it from them at ₹1,362 each.
In a brief notice to the exchanges, the retail arm of the conglomerate said that at a meeting held on Tuesday this week, the board had approved “a proposal to reduce the equity share capital to the extent held by shareholders other than its promoter and holding company, namely, Reliance Retail Ventures Limited.”
The company will seek its shareholders’ approval through a special resolution and other regulatory approvals.
RRVL holds 99.91 per cent stake of Reliance Retail, while 0.09 per cent or 78.65 lakh shares are held by non-promoter shareholders.
Sources said the reason for buying the shares and making it a wholly-owned subsidiary of RRVL, was because some brokers and their intermediaries were trading the company’s shares, which are not listed, privately at random prices on their websites without any fair price discovery.
The company had no intention of listing its shares on the stock exchanges and the private trading will result in the shares losing marketability and liquidity. This situation would leave shareholders without any exit opportunities and unable to capitalise on their investments.
The company would be able to structure its businesses more efficiently in compliance with the regulations if it were a wholly-owned subsidiary.
Reliance Retail’s shares have been valued at ₹884.03 by Ernst & Young Merchant Banking Services and at ₹849.08 by BDO Valuation Advisory. Based on the sum of parts valuation of RIL, the equity value of Reliance Retail has been pegged at ₹794 per share. The private trading being done did not reflect these valuations.
Volume up
According to data, the number of shares being traded has gone up to 2.45 lakh in June from 43,740 shares in January this year and more investors were being added every month.
In 2020, a clutch of private equity funds including KKR, Singapore’s GIC, US-based global PE firm Silver Lake, Abu Dhabi Investment Authority, Mubadla, TPG, General Atlantic and Saudi Arabia’s Public Investment Fund, had taken a 10.1 per cent stake in RRVL for over ₹47,000 crore valuing it at over ₹4.2-lakh crore.
However, a lot has happened since then with a number of joint ventures being added to it and other businesses such as Reliance Consumer Products, Reliance Brands, logistics and warehousing.