Reliance Retail opts for reduction of share capital at Rs 1,362 per share
On July 4, 2023, the board of directors of Reliance Industries Ltd (RIL) approved a proposal to reduce the equity share capital of its retail unit, Reliance Retail. In a stock exchange filing, RIL announced that a payout of Rs 1,362 per share would be made.
According to the filing, shares held by shareholders other than the promoter and the holding company, Reliance Retail Ventures Limited, will be cancelled and extinguished as a result of this reduction in equity share capital. The proposal, approved by the board, will lead to the elimination of these shares held by such shareholders.
The reduction in equity share capital of Reliance Retail indicates a strategic move by Reliance Industries to streamline and consolidate its ownership structure. By cancelling and extinguishing the shares held by non-promoter shareholders, the company aims to simplify its shareholding pattern and potentially enhance its operational and financial efficiency.
RRVL, the promoter and holding company of Reliance Retail, currently holds 99.91% of the share capital of the company. The remaining 0.09%, which equates to approximately 78.65 lakh equity shares, are held by identified shareholders.
However, it is important to note that the proposed capital reduction is subject to regulatory approvals and will also require approval from the members of the company through a special resolution. Additionally, obtaining sanction from the National Company Law Tribunal, specifically the Mumbai bench, is a necessary step for implementing this capital reduction.
To initiate the process, Reliance Retail will be sending a notice to its shareholders, providing them with information and seeking their approval for the proposed capital reduction. The notice will outline the details of the reduction plan and provide shareholders with the opportunity to express their views and vote on the matter.
Obtaining regulatory approvals and securing the consent of the members and the National Company Law Tribunal are crucial steps in ensuring compliance with legal requirements and ensuring that the capital reduction is executed in a proper and lawful manner.
As of now, the equity shares of Reliance Retail are not listed on any stock exchange. Therefore, the valuation of the company has been determined by two independent registered valuers appointed by Reliance Retail, namely Ernst & Young Merchant Banking Services and BDO Valuation Advisory LLP.
According to reports by PTI, Ernst & Young valued Reliance Retail at Rs 884.03 per share, while BDO Valuation Advisory LLP estimated the price at Rs 849.08 per share. These valuations were conducted to ascertain the fair value of the company’s shares.
Additionally, Reuters reported that Reliance Retail has been valued between $92-96 billion by two global consultants appointed by the company. This valuation is an estimation of the overall worth of the company based on various factors such as financial performance, market conditions, and future growth prospects.
The reduction of share capital refers to the process through which a company decreases the amount of its share capital by canceling or extinguishing a portion that is deemed surplus to the company’s requirements.
According to a source with direct knowledge of the matter, Reliance Industries had appointed independent valuers, Ernst & Young (EY) and BDO, to determine the valuation of its subsidiary Reliance Retail. EY valued the company at $96.14 billion, while BDO estimated the valuation at approximately $92 billion, as reported by Reuters.
Reliance Retail comprises Mukesh Ambani‘s core retail businesses, including both digital and brick-and-mortar stores. The subsidiary is fully owned by Reliance Retail Ventures Limited, which also encompasses other retail operations, such as international partnerships and the billionaire’s consumer goods business.
The valuations provided by EY and BDO demonstrate that consultants believe Ambani’s businesses are experiencing rapid growth. In 2020, Reliance Retail Ventures raised Rs 47,265 crore ($5.72 billion) by selling a 10.09% stake in the company, valuing it at approximately $57 billion. The significant increase in valuation from $57 billion to the current estimates of $92-96 billion indicates the consultants’ confidence in the growth potential and market value of Reliance Retail.
Reliance Industries’ strategic investments and expansion into the retail sector, combined with the success of its digital initiatives, have contributed to the growth of Reliance Retail. The company has been actively engaging in partnerships and acquisitions to strengthen its presence in both online and offline retail, positioning itself as a major player in the Indian retail landscape.
