Silver Lake Values Reliance Retail Lower Than Most Brokerage Estimates
Customers browse clothing inside the new Marks & Spencer Reliance India Pvt. store in the Bandra area of Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Silver Lake Values Reliance Retail Lower Than Most Brokerage Estimates

Silver Lake invested in Reliance Retail Ventures Ltd. at a valuation that's in line with parent Retail Industries Ltd.'s calculations, but below the brokerage estimates.

The private equity firm acquired 1.75% stake in the holding arm of Ambani's retail unit for Rs 7,500 crore, according to an exchange filing. The transaction happened at a pre-equity valuation of Rs 4.21 lakh crore.

Reliance Industries, according to its filings, had invested in the retail unit at similar valuations a week ago.

Private Placement

Reliance Industries held 94.45% in Reliance Retail Ventures, according to the balance sheet of the retail unit. Vanishree Commercial Ltd. and Infotel Infocomm Enterprises Pvt. owned the rest.

Reliance then invested Rs 11,650 crore in Reliance Retail Ventures through a private placement at Rs 682.25 apiece, marginally increasing its holding. The transaction, according to filings, occurred at a pre-investment equity value of Rs 4.21 lakh crore.

The price is not lower than the fair value recommended by the registered valuer, the company said.

Silver Lake invested Rs 7,500 crore at the same share price, giving the retail unit a post-equity valuation of Rs 4.28 lakh crore.

While Silver Lake will hold 1.75% after the deal, Reliance's ownership in the retail arm stand's at nearly 93%.

Brokerage Estimates

Silver Lake's investment values Reliance Retail Ventures at $58.3 billion post-investment. That compares with an average valuation of $61.3 billion by brokerages—with Nomura's $77.4 billion being the highest, and Morgan Stanley's the lowest at $44 billion.

Silver Lake's investment comes after Reliance Retail announced acquisition of the retail, wholesale, logistics and warehousing business of the Future Group for Rs 24,713 crore. The proceeds will be used to fund this deal. Silver Lake has already invested Reliance's digital assets in two separate deals as part of the Mukesh Ambani's fundraising blitz.

Reliance is also in talks with KKR for a stake sale in the retail unit, Bloomberg reported.

Also read: Reliance-Future Deal: How Ambani’s Dominance Changes India’s Retail Landscape

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