REL decalred yesterday (Wednesday) that it would buy back shares worth up to Rs 2,000 crore at a price of up to Rs 1,600 a share, which is almost at a 9.6% premium over Wednesday’s closing price.
The amount of money which is allocated for buyback, the company has the capacity to purchase around 1.25 crore shares from the open market, & hence the promoters stake would rise 1.5% to 37% on a reduced equity base.
The buyback will go on in 2 phases. The first phase will ensure Rs 800 crore to be released, while the remaining Rs 1,200 crore will be allotted in the second phase, subject to shareholders’ approval. The buyback is to “reduce short-term volatility in the company’s share price and deter speculative activity” in the stock, the company said in a statement.
As per the news, the promoters’ equity in the power distribution company stands at 35.5% after they scaled up their holding by 2.5% in past one year through creeping acquisitions. The REL stock quadrupled in 2007, making it one of the top performers in the stock market. The share has fallen over 30% so far this year, more than the BSE index’s 18.5% drop. Ahead of the buyback announcement, the REL share closed 3% lower at Rs 1,459.45 on the BSE on Wednesday.
The move, which aims to bolster investor confidence, came soon after REL arm Reliance Power announced three bonus shares for every five shares held by its investors. Reliance Power slumped 17% on its debut in February after raising Rs 12,000 crore through the country’s largest IPO.
Post-announcement of the bonus issue, the Reliance Power stock crossed the issue price of Rs 450. But it came down by 4.1% on Wednesday to close at Rs 376.25. The bonus shares will bring down the cost of acquiring Reliance Power shares to Rs 269 for retail investors and Rs 281 to others. The Reliance Power shares were sold at Rs 450 through the IPO, which offered Rs 20 discount to retail investors.
This is the second time REL is going for a buyback after the Reliance group had acquired the erstwhile BSES. Earlier, in June 2004, before the demerger of the Reliance group, it had bought back shares worth Rs 350 crore.
| As the markets are efficient, the price benefit for share buyback will soon get into the market price. Short term betters can try their luck. Other long term investors should hold on to their stocks | Table of Contents |
1 comment:
is it good to buy the share now as a investor for short term period.
and will i be getting any benifit of buy backing by the company. please tell me.
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