A stock swap offer to help shareholders of billionaire Mukesh Ambani’s unlisted retail business monetize their investment has valued the unit at $34 billion.
Share owners in Reliance Retail Ltd. can exchange four shares for one of its listed parent Reliance Industries Ltd., according to a so-called scheme of arrangement posted on the group’s website. With Reliance’s market capitalization at Rs 9.6 lakh crore ($135 billion), the share swap values the subsidiary at Rs 2.4 lakh crore, according to Bloomberg’s calculation.
Besides helping Reliance Retail employees monetize illiquid stock options, the share swap also gives the first indication of the unit’s valuation at a time when Mr Ambani, Asia’s richest man, is scouting for investors in the retail unit. He has promised to slash the group’s net debt to zero by March 2021 after an investment spree of $76 billion in the past five years, bulk of it on its massively disruptive telecom carrier.
The valuation set by Reliance exceeds that of Tesco Plc, the U.K.’s biggest supermarket chain, which is valued at $32 billion. It’s also double that of Avenue Supermarts Ltd., which runs India’s biggest supermarket chain.
“This may be a step toward creating a reference value, fixing a floor price for any future strategic investments in Reliance Retail,” said Rajiv Sharma, Mumbai-based analyst at SBICAP Securities Ltd. “The street is estimating the unit’s value at plus or minus 30 per cent of that reference value.”