Announcing that there is no plan to list the company, Reliance Retail Limited (RRL) has proposed a scheme where it will offer one share of Reliance Industries Limited (RIL) for every four shares of the company to its shareholders, thereby valuing RRL at close to Rs 2.5 lakh crore.
At this valuation, Reliance Retail — which runs several domestic retail outlets and houses a number of international brands — would be equivalent to the 12th largest listed entity in India with a market cap higher than that of Bharti Airtel, Maruti Suzuki and Larsen and Toubro among others.
Share of RIL fell 1.94 per cent, following the disclosure of the share swap arrangement. RRL will also be the largest retail company in the country as its market cap will be over two times that of Avenue Supermarts — the highest-valued listed retail entity in the country.
Other than Reliance Fresh, Reliance Smart, Reliance Trends, Hamleys and Reliance Digital, the company has a portfolio of over 45 international brands.
Disclosing the scheme of arrangement that has been recommended by BDO and Ernst & Young Merchant Banking Services, the company said that it had been receiving requests from employees holding equity shares for providing them options for exit and liquidity, including by way of listing of the equity shares.
RRL further said that the company does not have any plan for listing of its equity shares on the stock exchanges.
“In view of the above, the Company is proposing a scheme of arrangement with its equity shareholders in terms of which, equity shareholders of the Company as on the Record Date, other than the holding company viz., Reliance Retail Ventures Limited (RRVL), are being given listed equity shares of Reliance Industries Limited (the ultimate holding company of the Company) – 1 (one) equity share of RIL for every 4 (four) equity shares of the Company and the corresponding equity share capital held by them in the Company is being reduced and cancelled, without payment of any consideration,” said the company in an announcement on its website.
Scheme positions company as India’s largest retailer
The share swap plan effectively positions Reliance Retail as the largest retail company in India with a market cap of over two times that of Avenue Supermarts — the highest-valued listed retail entity in the country. Other than Reliance Fresh, Reliance Smart, Reliance Trends, Reliance Digital and Hamleys, the company has a portfolio of over 45 international brands that include Armani Exchange, Diesel, Burberry, Marks & Spencer, Hugo Boss, Tiffany & Co and Mothercare, among others.
As per documents made available on its website, there are a total of 35,77,527 shares of Reliance Retail that are held by the specified shareholders — shareholders of the company other than RRVL (promoter entity of RRL).
While 25,24,590 shares have already been allotted, 10,52,937 shares remain outstanding as on December 11, 2019 and the company plans to allot them before the effectiveness of the scheme.
The company said that it, “had implemented two schemes namely Reliance Retail Employees’ Restricted Stock Unit Plan 2006 and 2007 under which Restricted Stock Units (RSU) have been allotted to eligible employees. On exercise of the RSUs by some of the employees, equity shares have been allotted to them. Some RSUs are outstanding against which equity shares will be allotted on exercise before effectiveness of the proposed scheme of arrangement.”
Detailing the implementation of the proposed scheme, Reliance Retail said that Pranatharthi Commercials Private Limited (set up by two RIL group employees) will first “acquire the required number of equity shares of RIL for the purpose of exchange with the equity shares of the Company held by the Specified Shareholders”.
The equity shares of RRL, so acquired by Pranatharthi, will be cancelled and reduced without payment of any consideration.
“Upon the implementation of the scheme, Reliance Retail Ventures Limited, the holding company of the Company, will hold 100 per cent of the paid-up equity share capital of the Company,” said the company. As of now, 99.95 per cent stares of RRL are held by RRVL.
Clarifying that the scheme will have no impact on the key managerial personnel of the company, RRL said that 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”.
It also said that the scheme will have no impact on the preference shareholders of the company. In the first half of FY19, Reliance Retail announced a net profit of Rs 2,193 crore on a revenue of Rs 63,521 crore. In the financial year ended March 2019, the company reported a net profit of Rs 3,138 crore over a revenue of Rs 1,02,058 crore.
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