Mukesh Ambani-owned Reliance Retail's latest valuation stands at $34 billion owing to a share swap scheme that has helped its shareholders monetise their investment (illiquid stock options). Stock owners in Ambani's unlisted retail business are given an offer whereby they can exchange four shares for one of its parent company Reliance Industries Ltd (RIL). This is as per a scheme of arrangement posted on the group's website.
"The company had implemented two schemes namely Reliance Retail Employees' Restricted Stock Unit Plan 2006 and 2007 under which Restricted Stock Units ("RSUs") have been allotted to eligible employees. On exercise of the RSUs by some of the employees, equity shares have been allotted to them," RIL said on its website.
The conglomerate added it had received requests from Reliance Retail employees holding its equity shares for giving them options to exit and liquidate their stocks.
With the RIL's latest market capitalisation standing at Rs 9.8 lakh crore ($137 billion), the stock swap offer values its subsidiary (Reliance Retail) at Rs 2.4 lakh crore, according to Bloomberg's calculation. It also values Reliance Retail at more than Tesco Plc, which is the UK's biggest supermarket chain.
"This scheme enables the specified shareholders to continue to participate in the growth of the retail business (the business of the company), as hitherto since the company is an indirect subsidiary of Reliance Industries," RIL said.
"Since, the scheme does not contemplate any outflow of funds/assets of the Company, the aggregate of 'equity and other equity' of the company pre and post-implementation of the scheme will remain the same and unaltered," RIL added.
However, Reliance Retail says on its website that it is not planning to list its equity shares on the stock exchanges. Ambani had last year said that the RIL's retail arm would be listed by 2024.
With this share swap offer, Ambani is on a lookout for investors for Reliance Retail.
The 62-year old Chairman of RIL had earlier announced plans to cut the group's net debt to zero by early 2021 along with other plans in the pipeline.
With 10,901 stores across the country, Reliance Retail is India's top wholesale supplier to small shopkeepers. The RIL's subsidiary operates India's largest chain of neighbourhood supermarket stores and consumer electronics stores.
Expanding its footprints across grocery, consumer electronics, fashion and lifestyle segments, Reliance Retail opened 337 new stores in the quarter, taking the overall number to 10,901 stores.
Reliance Retail posted a net profit of Rs 1,148 crore in Q2, a 55.8 per cent rise on an annual basis. The company's revenue in the second quarter increased to Rs 41,202 crore, up 27 per cent year-on-year (Y-o-Y). RIL said the Q2 revenue of Reliance Retail surpassed the Rs 40,000-crore milestone, which, it claimed, is higher than "the annual revenue registered by the next largest retailer in India".