Now, CLSA says RIL may consider another buyback

In Feb 2012, RIL bought back 46 million shares worth over Rs 3,366 crore from public shareholders

The buzz surrounding another share buyback by Reliance Industries Ltd (RIL) is growing on Dalal Street. Almost three months after Goldman Sachs hinted at a possibility of RIL announcing a buyback, another brokerage house, CLSA, in a report released on Friday, too, said the company may consider such a move if the stock remained weak. Such talks have resurfaced, with the 12-month cool-off after the previous buyback ending this month.

“Another buyback is possible as regulatory moratorium ends in February. As the stock is within 15 per cent of the last average buyback price, this should limit the downside,” said CLSA's analyst Vikash Kumar Jain in a note to clients.

On February 7, 2012, RIL had launched the largest buyback programme by any Indian company. According to its annual report, RIL had bought back 46.24 million shares of Rs 3,366 crore from public shareholders.

CLSA, which upgraded the stock’s rating to a buy with a target of Rs 1,050, said a buyback should limit further downsides. The share, which closed 0.75 per cent higher over the previous close at Rs 857 on Friday, have mostly moved between Rs 775 and Rs 925 in the last year.

Goldman Sachs’ analysts Nilesh Banerjee and Vikas Jain, in their report in early September, had said, “Our discussion with the company indicates that following the buyback last year, the management is open to considering ways to reward shareholders again.”

In addition to the buyback, CLSA attributed its upgrade to a likely increase in gas production.

“After three years of near-linear decline, production from RIL’s flagship KG-D6 block should rise from 2014,” said Jain. “This will start with an incremental production from the MA field as Reliance had recently added an MA8 well (in January). This will be followed by repairs and improvements in D1-D3 fields (mid- 2014)”.