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    Reliance Retail shareholders may challenge RIL share swap at NCLT

    Synopsis

    Investors and dealers are dejected and outraged by RIL’s offer.

    ETMarkets.com
    New Delhi: Many brokers and retail shareholders from the unlisted market have decided to challenge Reliance Industries’ (RIL) share swap offer for Reliance Retail (RRL) shareholders at the National Company Law Tribunal (NCLT).

    Investors and dealers are dejected and outraged by RIL’s offer, as under the scheme they face a loss of Rs 640-650 per equity share of Reliance Retail they hold. Worse, the scheme is mandatory for minority shareholders, which is adding fuel to the fire.

    RIL holds 99.95 per cent stake in Reliance Retail and only about 35 lakh equity shares are available in the unofficial market for unlisted stocks.

    “Why has this issue been made compulsory for minority stakeholders?” asked a dealer of unlisted shares, on the condition of anonymity.

    The country’s biggest firm by market valuation on December 25 offered a 4:1 swap ratio to the minority shareholders of Reliance Retail, which implied investors can get one share of RIL for every four Reliance Retail shares they hold. The swap ratio valued the retail business at Rs 2.5 lakh crore.

    The unofficial market values Reliance Retail at Rs 5 lakh crore.

    “If it is so important for RIL to bring in this swap, then why is it not proposed for the 99.95 per cent of stake as well? Effect the exchange for all and merge RRL into RIL,” he said.

    Another dealer, who did not wished to be named, said at the annual general meeting (AGM), RIL Chairman Mukesh Ambani promised an IPO of Reliance Retail in five year to unlock the value of the business.

    “When the unlisted space had unlocked the value, they are trying to lock it again suppressing minority stakeholders. Their circular to NCLT suggests the company is not planning to bring in any IPO at all. There is some level of deception,” he alleged.

    RIL is convening an extraordinary general meeting on January 23, 2020. “If they want to give exit to minority shareholders, then they should let them vote. Those who want to exit will opt for the scheme and the rest will hold the stocks,” the dealer cited above said.

    Some brokers questioned RIL’s rationale for the share swap as an attempt to ensure liquidity in a stock. But traders say the stock already has a lot of liquid in the unlisted space. Why should a shareholder sell the stake at a lower price than market rates, they asked.

    The other broker also alleged the possibility of people taking undue advantage of insider information. “Since the NCLT order was passed on December 17, 2019, it is quite possible that the company would have gone to NCLT in mid-June 2019,” he said.

    “The order clearly states that the company is not willing to bring an IPO of Reliance Retail, but at the AGM on August 12, 2019, Mukesh Ambani promised listing of its retail venture by 2024. This means employees must have had internal information and reaped benefits from the unlisted space,” he claimed.

    Abhay Doshi, an independent broker of unlisted stocks, said, “The unlisted market overvalued the stock and RIL is undervaluing it. Reliance Industries can do it on legal grounds. There have been past experiences of the same. The same thing happened with Essar Steel shareholders, when the scrip was extinguished.”

    Navneet Dugar, Principal Advisor, Zemis Advisors, said, “RIL has all the rights to carry out the exchange, but stakeholders can challenge the valuation at NCLT.”



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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