Morgan, Merrill Lynch & Citi exit R-Infra

Slump-hit FIIs sell stake in company's share buyback.

Foreign institutional investors (FIIs) such as Morgan Stanley, Merrill Lynch and Citigroup have sold off their holdings in Anil Ambani-promoted Reliance Infrastructure (R-Infra) after the company opened a buyback offer in March this year.

Morgan Stanley is the latest FII to sell its stake (4.18 per cent) to the company in the September quarter, said sources in the know.

After the company began the Rs 800-crore buyback in early March, the FIIs' total holdings in it have fallen to 16.89 per cent until September 2008 from 20.87 per cent in December 2007.

According to the latest announcement, R-Infra has spent Rs 711 crore for the buyback of 7,260,000 equity shares until November 7. The company is expected to complete the first tranche of the total Rs 2,000-crore buyback by March 4, 2009.

An R-Infra spokesperson said, "The company’s buyback of shares is aimed at reinforcing investors' confidence. These shares are bought from the open market through a transparent process and are not dependent on the sellers."

"The company is cautious about the pullback of FIIs, even though it happens to most firms, especially after the economic downturn. These FIIs sold off their stakes partly to the company and the remaining in the open market. Whenever FIIs sold shares heavily, the company held back the buyback for restricting the stock fall. As the situation is slightly improving, R-Infra is looking to increase the buyback since the share price is around Rs 600, which is considerably lower than the expectation of the company," the spokesperson added.

Since the shares shot up by 16.28 per cent last week, the existing FIIs in the company, including Bank of New York and Natixis, are regaining confidence and continue holding their stakes, sources added.

Bank of New York has a 2.58 per cent stake, though it sold off about 5 lakh shares in the second quarter, when FIIs were exiting the domestic market in panic. Natixis holds 1.49 per cent stake in R-Infra, according to the information available on the Bombay Stock Exchange.

Merrill Lynch and Citigroup had exited by selling off their 1.37 per cent and 1.51 per cent stakes, respectively, in the June quarter. With the buyback, the promoters' stake in the company, formerly known as Reliance Energy, has increased to 36.83 per cent from 34.68 per cent.

According to the earlier plan, the company wanted to buy back 50 lakh-plus shares at a price not exceeding Rs 1,600 a share, aggregating to Rs 800.06 crore, to raise the promoters’ stake in the company.

However, the fall in the share price has helped the company buy back more shares with the announced fund. If the situation continues, the company would quickly finish the first tranche and begin the second round of the Rs 1,200-crore buyback, said sources.