Reliance Industries on Thursday offered shareholders of its subsidiary Reliance Retail to swap their shares with RIL’s. The move is being done to provide liquidity to shareholders of Reliance Retail, which is yet unlisted; the shares were allotted more than a decade ago.

Shareholders will get one share of RIL (current market price ₹1,545) for every four shares they hold in Reliance Retail. The swap ratio values RIL’s retail business at about ₹2.5 lakh crore, making it India’s most-valuable retailer after Mumbai-based D’Mart.

The scheme will be applicable to Reliance Retail employees, who were allotted shares, or restricted stock units (RSUs), under two employee stock option plans (ESOPs) implemented in 2006 and 2007. When employees exercised some RSUs, they were allotted shares of Reliance Retail. As on December 11, 2019, there were 17,54,894 RSU’s outstanding, against which 10,52,937 equity shares are proposed to be allotted before the effective date for them to be swapped for RIL shares.

Though Reliance Retail on its website says it does not have any plans for a listing of its equity shares on the stock exchanges, Mukesh Ambani, chairman and managing director of RIL, had last August, in the company’s annual general meeting, said that Reliance Retail would be listed by 2024.

RIL has also clarified that there will be no outflow of funds or assets of the company. In particular, its equity structure will remain the same post allotment of shares in lieu of Reliance Retail shares. “Since, the scheme does not contemplate any outflow of funds/assets of the company, the aggregate equity and other equity of the company pre- and post-implementation of the scheme will remain the same and unaltered,” RIL said.

Earlier, business daily Economic Times had reported that Reliance Retail shares started trading in the unlisted market in June, between ₹475 and ₹500 apiece, fetching the retailing arm a business value of ₹2.5-2.75 lakh crore, valuing it twice as much as D’Mart and a little lower than fast-moving consumer goods major ITC.

The company has stated that it is conducting the exercise to offer its long-standing shareholders liquidity to encash their holding through RIL shares. However, a research head from a foreign broking house says the move may not be what the Reliance Retail shareholders may have desired. Says he: “The option holders will now be exposed to other businesses like petrochemcials and telecom, which they had not initially bargained for. “

Another executive from the Future Group, who did not wish to be named, says: “Reliance Retail shareholders would have received annual statement of accounts of their company as it is mandated by law. With those shares extinguished, we will get to know about the business as stated in RIL’s balance sheet which will be shorn of details.”

Reliance started the retail business in 2006 with a grocery store and the company has since spent ₹14,000 crore on the business. It has built a network of 10,644 stores across grocery, lifestyle, apparel, and electronics formats, with 2,829 outlets opening in the previous financial year. Last year, Reliance Retail logged net sales of ₹1.3 lakh crore, with Ebitda (earnings before interest, taxes, depreciation, and amortisation) at ₹6,201 crore.

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