Analysts said that the move clearly aims to arrest the slide in its stock price and appease investors. The stock had caught the fancy of investors since August 2007, when it was hovering at around Rs 800 and peaked at Rs 2,631 in the first week of January 2008just days before the opening of the Rs 11,000-crore mega issue of subsidiary Reliance Power.
Subsequent to the issue, coupled with weak global markets, REL saw its share price dip by Rs 1,000. It lost more than Rs 15,000 crore in market capitalisation, reckon brokers. On Tuesday, REL shares were trading at Rs 1,697.25, up by Rs 74.55, or 4.9%, from its previous days close.
An REL statement said, Reliance Energy today announced that the board of directors of the company would meet on Wednesday, March 5, to consider, inter alia, the buyback of equity shares of the company, subject to necessary approvals. But the company did not divulge further details.
Sources in the know told FE that REL, which has reserves of over Rs 11,000 crore, proposes to spend Rs 1,000-2,500 crore for the share buyback. The company would repurchase outstanding shares in order to reduce the number available for open trading, thus increasing the proportion owned by RELs promoters.
According to sources, this pre-emptive move is being made at a time when the market cap of REL hovers at around Rs 36,000 crore. The group is expected to defend the market capitalisation at Rs 40,000-45,000 crore.
This announcement comes close on the heels of the February 24 announcement of a 3:5 bonus issue by Reliance Power, after its poor listing performance. Market denizens believe this is an attempt to reassure investors that the company is alert to their sentiments.