Decision to reduce Reliance Retail shareholding a clear precursor to listing

The decision of Reliance Industries Limited (RIL) to reduce the equity share capital of Reliance Retail Limited (RRL), its subsidiary, is being viewed as a step towards a potential listing. On Friday, a statement from RIL said the reduction is to the extent of the holding of the promoter or the holding company.  

In terms of actual shareholding, RIL’s stake in Reliance Retail Ventures is 85.06 per cent; in turn the latter holds 99.93 per cent in RRL. Over three years, a host of global investors, amongst which were KKR, Mubadala, Abu Dhabi Investment Authority, General Atlantic, GIC and TPG, put in over Rs 47,000 crore for a 10.09 stake in Reliance Retail Ventures. 

The existing minority shareholders in RRL will get Rs 1,362 per share. A large chunk of them are said to be employees holding stock options. Interestingly, the price in the grey market is said to be close to Rs 3,000 per share and at one point, even hit Rs 4,000. However, going by the sum of the parts logic, global brokerages peg the value of RRL at around Rs 1,200 per share. Speaking of the business, Reliance Retail, for FY23, had revenues of Rs 2.6 lakh crore, which was a 30 per cent spike from the previous fiscal. Net profit was over Rs 9,000 crore, with the company having a presence across segments such as consumer electronics, grocery and fashion & lifestyle. The digital commerce and new commerce business has AJIO and JioMart. 

Deven Choksey, Promoter and MD of KRChoksey Group, a wealth management firm, thinks there is a good chance RRL will get listed during the current fiscal. “That is the ultimate objective,” he says. Meanwhile, the RIL stock was up over four per cent today. “The management of Reliance Industries has already indicated that some of its businesses will be listed. This decision to reduce shareholding in Reliance Retail can be viewed as a step in that direction,” says Kranthi Bathini, equity strategist at WealthMills Securities.