Scrapped listing plan weighs on Reliance Retail's unlisted shares

Trades in Reliance Retail’s unlisted shares are said to have been affected by the announcement of a scheme through which the company’s shares would be exchanged for a stake in the parent company, Reliance Industries Limited (RIL).

Lower-than-expected valuation for the swap and the dashing of hopes of listing gains are said to have weighed on sentiment, according to unlisted share dealers. 

One Kolkata-based dealer in unlisted securities said that trades had earlier taken place at a high of Rs800 a share for Reliance Retail. The price implied by the new merger would be under Rs400. This has affected volumes. Another Mumbai-based dealer said that there were sellers for the stock, but no buyers, as the asking price was still more than double the price implied by the merger. 

“Everybody is in a state of shock,” said one dealer. 

“There are sellers in the market, but there are no buyers after the news,” said another dealer. 

The scheme of arrangement was because there has been no plan for listing, according to a document detailing the move. “The company has been receiving requests from the employees holding equity shares for providing them options for exit and liquidity, including by way of listing of the equity shares… The company does not have any plan for listing of its equity shares on the stock exchanges,” it said. 

The company had earlier suggested a listing plan for its retail arm in five years. It announced on its website that investors would get one share of Reliance Industries for every four Reliance Retail shares that they hold. 

Independent analyst SP Tulsian said that the market was factoring in a Rs4-trillion valuation for Reliance Retail, based on grey market prices. This segment sees limited trading in terms of volume. It may not be an accurate barometer for the valuation of a company, according to him. The current swap would value it under Rs3 trillion (Rs2.4 trillion, according to a Bloomberg calculation).

“Optically, it has given a jerk to the share price of Reliance,” he said. 

The price of RIL shares fell 2 per cent to close at Rs1,515.4 on Thursday. 

Independent market analyst Anand Tandon said that the even if Reliance Retail doesn’t choose to list, other routes, such as private equity, could still be explored. “There may not be a plan to list the company but they can still raise money,” he said. 

An e-mail sent to a company spokesperson did not immediately receive a reply. 

Interestingly, the scheme seems to suggest that the swap will be given effect even without specific action from the shareholders.

“Upon the effectiveness of the scheme and 1 (One) day after the record date, the specified shares held by the specified shareholders shall be deemed to have been transferred and vested…without any act or deed, on part of the specified shareholders. Necessary corporate action will be executed by the company to give effect to the aforesaid transfer,” it stated. 

A shareholder meeting on the matter is slotted for January 23, according to a note on the company website.