India's Reliance to consider share buyback

MUMBAI - Reliance Industries could be set to conduct India's largest ever buyback of shares, analysts said on Wednesday, in a move to boost investor confidence after a steep fall in its share price last year.

India's largest private firm said in a statement to the Bombay Stock Exchange that it would "consider a proposal for buyback of shares" at a board meeting on Friday, when quarterly earnings are due.


No further details about the buyback were provided but the announcement cheered investors, pushing up Reliance shares on the blue-chip Sensex index by as much as 6.2 percent to an intraday high of 786.8 rupees.

"Whatever may be the company's announcement, it is reasonable to expect that this will be the largest ever buyback programme in the history of Indian capital market," Jagannadham Thunuguntla, head of research with SMC Global Securities in New Delhi, told AFP.

Thunuguntla estimates Reliance's buyback -- at near 10 percent of its current share capital -- to be 100-146 billion rupees ($2-3 billion) in size.

"This buyback announcement will be a strong statement from Reliance that they feel the current share price is undervalued compared with what they believe is its intrinsic worth," he added.

Cash-rich Reliance saw its share price tumble by 35 percent in 2011, hit by concerns about slowing gas output from its fields off India's east coast and valuation worries for other still-to-be-explored energy assets.

The oil and energy giant, controlled by India's richest man Mukesh Ambani, has been scouting for acquisitions and looking to diversify its revenue sources by expanding into financial services, retailing, hotels and communications.

It recently announced a foray into the Indian media sector as well as telecom and broadband.

The petrochemical giant has built up a war chest for acquisitions, generating $2 billion through stock sales in 2009, and has cash reserves of more than 614 billion rupees ($12.6 billion), as of September-end quarter.

In 2011, Reliance signed a $7.2-billion deal with BP for the British firm to take a 30-percent stake in its 21 largely unexplored deep water oil and gas fields off India's coast.



(c) 2012 AFP

Source : AFP