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RIL ends 7-yr wait, woos mkt with biggest buyback plan

19 Jan 2012 Evaluate

Reliance Industries will consider buying backshares for the first time in more than seven years. The plan will be discussedat the company’s board meeting on January 20, when the third quarter resultswill be announced. Reliance has cash and cash equivalents of Rs 61,490 crore. The buyback programme implies two things. First, thecompany does not have any significant acquisition plan in the near future.Second, the buyback is being used as a tool to prop up the share price. Thebuyback will also be a strong statement from the company's management that theyfeel the share price in the market is undervalued.

Assuming about 10 per cent premium, themaximum buyback price may be fixed at about Rs 850 a share.  The current share capital plus free reservesof the company were about Rs 1,46,000 crore, according to the latest financialson March 31, 2011. If RIL goes for 10 per cent of this amount as the maximumbuyback size, it will be about Rs 14,600 crore.  Irrespective of thebuyback size, there is no mandatory requirement that the company will have tobuy the entire amount on offer. Reliance had last come out with a buybackprogramme in 2004. The company had bought back about five per cent of theannounced buyback programme then.

Reliance Industries Share Price

1365.10 21.65 (1.61%)
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