Unlisted shares of Reliance Retail turn premium, surge 40%
Reliance Retail contributes about 30% of RIL’s revenue. It is the fastest-growing segment for the group now
Shares of unlisted Reliance Retail Ltd are changing hands at a more than 40% premium to prices prevailing just a month back, fuelled by euphoric bets that the Mukesh Ambani-led company will be listed soon, analysts tracking the stock said.
“The company’s shares are currently changing hands at ₹2,030 apiece against ₹1,450 in April, assigning a value that is more than two-thirds of its parent Reliance Industries Ltd. The share price surged over 2.13 times since December 2019, when it changed hands at ₹950 apiece,” said Aditya Kondwar, chief operating officer, JST Investments.
Unlike the trading of listed companies that happens on stock exchanges, trading in unlisted shares is an over-the-counter transaction. It is a person-to-person deal and is carried out by brokers. The supply of these shares comes from company employees, who have received ESOPs and may be looking for liquidity before a share buyback or listing of the company, as well as early investors, usually individuals, of the company seeking an exit. On the other hand, buyers of such shares are looking to get an early entry into a company that may be planning to go public, hoping to make a good return when the company hits the public market at a higher valuation.
In the case of Reliance Retail, filings with the registrar of companies show that as of 31 March 2020, the company had over 1,500 individual shareholders, with some holding as few as four shares of the company.
Reliance Retail is a unit of Reliance Retail Ventures Ltd (RRVL), which in turn is a subsidiary of Reliance Industries Ltd (RIL). Reliance Retail contributes about 30% of RIL’s revenue and has emerged as the fastest-growing segment for the Reliance group along with its digital services business.
“Although margins have grown substantially backed by the growth of JioMart and AJIO, the current valuation in the unlisted market looks quite expensive. The unlisted market values Reliance Retail Ltd at around ₹10 trillion while Reliance Industries, which also includes Jio and oil business along with other businesses, is valued at ₹14 trillion,” said Manan Doshi, co-founder, UnlistedArena.com dealing in unlisted and pre-IPO shares.
Reliance Retail is already India’s largest retailer, both in terms of store count and revenue. After raising more than ₹47,000 crore through a 10% stake sale to global investors at a valuation of ₹4.2 trillion in November 2020, RRVL is expanding its private grocery labels and pushing into smaller towns. Analysts expect core retail revenue to more than double over FY20-25, with grocery accounting for over half of incremental revenue followed by other verticals.
The share price in the unlisted market is also bolstered by RIL’s bid to acquire the retail business of Future Group for ₹24,700 crore.
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