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Ambani’s retail unit valued at US$34b in share swap

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A stock swap offer to help shareholders of billionaire Mukesh Ambani's unlisted retail business monetise their investment has valued the unit at US$34 billion.

[MUMBAI] A stock swap offer to help shareholders of billionaire Mukesh Ambani's unlisted retail business monetise their investment has valued the unit at US$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 capitalisation at 9.6 trillion rupees (S$182.3 billion), the share swap values the subsidiary at 2.4 trillion rupees, according to Bloomberg's calculation.

Besides helping Reliance Retail employees monetise 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 US$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 UK's biggest supermarket chain, which is valued at US$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."

The derived valuation is almost 14 per cent lower than analyst estimates, BloombergQuint reported Thursday. An email sent to Reliance Retail spokesman seeking comments on the valuation went unanswered.

Reliance Industries' shares slipped 2 per cent in Mumbai on Thursday to close at 1,515.4 rupees, outpacing the decline in benchmark S&P BSE Sensex which lost 0.7 per cent.

Mr Ambani had told shareholders in August that plans are afoot to find investors in the retail and telecom units. "We will induct leading global partners in these businesses in the next few quarters, and move toward listing of both these companies within the next five years," he said.

For the year to March, Reliance's organised retail revenue jumped 89 per cent to 1.3 trillion rupees in the year. The earnings before interest and taxes jumped 169 per cent to 55.5 billion rupees, according to a company statement which did not specify a net income for the business.

Reliance Retail, with 10,901 stores across the country, runs India's largest chain of neighbourhood supermarket stores and consumer electronics stores besides being the top wholesale supplier to nation's army of small shopkeepers.

BLOOMBERG