Reliance Retail Ventures may sell another 8-10% stake to prepare for IPO

Further dilution of stake might make its IPO size manageable

Reliance Retail Ventures Ltd (RRVL) may sell another 8-10 per cent of its stake to fund expansion and prepare for the initial public offering (IPO), The Economic Times (ET) reported on Friday, citing executives aware of the plan.

The process is likely to happen in the next 12 to 15 months.

The report further said that the sale of more stakes is necessary because the current valuation of $100 billion may be unsustainable and difficult for the markets to absorb. Further dilution of stake might make the IPO size manageable.

As per India’s listing rules, the public shareholding, including those held by financial investors, of a company must be at least 25 per cent. Currently, 11 per cent of RVNL's stake is owned by global investors. The latest of these was a 0.99 per cent stake taken by the Qatar Investment Authority (QIA) for $997 million.

 

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So, RVNL would need to dilute another 14 per cent of its stake to be able to bring out the IPO.

An executive was quoted in the report as saying, "If RRVL is able to sell around 20 per cent (including the current public holding) to investors, it can then offer around 5 per cent to the public in the IPO. That would make the IPO size almost $5 billion or Rs 41,000 crore at the current valuation. And with valuation growing by the time the IPO comes, RRVL has to continue selling shares to investors or the IPO will not be successful."

Reliance Retail, a subsidiary of RRVL, is the only Indian company among the global top 100 retailers. It is the largest in India by sales and profit. It is almost 3.5 times the value of the largest listed retail chain, Avenue Supermarts, which owns DMart, and 2.5 times the combined scale of the next three Indian retailers.