RIL may sell 8-10% more in Rel Retail ventures to fund expansion
Reliance Industries is likely to sell another 8-10% stake in Reliance Retail Ventures Ltd (RRVL) to fund expansion, retire debt and prepare for the initial public offering of the conglomerate's retail business, two senior industry executives aware of the plans said.
This process will likely happen in tranches over 12-15 months and will be critical for the proposed IPO by the holding company of Reliance's retail operations, the executives said.
The stake sale is crucial because at the current valuation of $100 billion (₹8.25 lakh crore), RRVL's IPO size will be humongous and the market may not have the liquidity to absorb such an offer. Hence, the company thinks, another 7-10% equity dilution will make the IPO size manageable to ensure its success since by then its valuation is also likely to go up, the people said.
As per India's listing rules, the public shareholding, including those held by financial investors, of a company must be at least 25%.
At present, around 11% in RRVL is owned by global investors, including Qatar Investment Authority (QIA) that on Wednesday invested ₹8,278 crore ($997 million) for a 0.99% stake.
Reliance Industries owns less than 89% and some shares are held by small investors.
'$10 billion investment'
At the current valuation, if RRVL were to go for an IPO, it would need to dilute around 14% shares worth about ₹1.15 lakh crore, an IPO size too big to be successful, one of the executives said. Hence, Reliance Industries will have to sell more equity in RRVL to either existing or new investors before the IPO, he said.
«If RRVL is able to sell around 20% (including the current public holding) to investors, it can then offer around 5% to the public in the IPO.
