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03 December 2023

$2bn Indian share buyback opens on Wednesday


India's Reliance Industries climbed more than two per cent on Tuesday ahead of the opening of its $2 billion share buyback -- the largest ever in the country's capital market history.

The company, whose shares are held by one out of every four Indian investors, plans to spend up to 104 billion rupees ($2 billion) to buy back its shares in a bid to bolster its sagging performance.

Reliance's 2012 buyback will begin on Wednesday and close January 19 next year, the company said in a statement on Monday. This is Reliance's second buyback since December 2004.

The buyback "is expected to enhance overall shareholder value", the company said in a newspaper advertisement.

The maximum buyback price will be 870 rupees per share, said the company, whose shares were up 2.1 per cent at 812.3 on Tuesday.

Reliance's share price slumped by 35 per cent in 2011, hit by investor concerns about slowing gas output from its fields off India's east coast, and valuation worries about other still-to-be-explored energy assets.

Analysts are concerned about Reliance's future earnings prospects after it reported its first quarterly drop in profit in two years earlier this month.

A share buyback will help boost investor confidence and avoid a free-fall in the stock price, analysts say.

The share buyback will be carried out through the open market.

The oil and energy giant 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 the telecom and broadband sectors.

The petrochemical giant has built up a war chest for acquisitions, generating $2 billion through stock sales in 2009, and had cash reserves of more than 745 billion rupees ($14.6 billion) at the end of last year.

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.