RIL buys back shares worth Rs 500 cr in 10 sessions

Mukesh Ambani’s Reliance Industries Ltd (RIL) has bought back shares worth a little over Rs 500 crore in just 10 trading sessions. Between May 11 and 24, the country’s second-highest valued company purchased 7.78 million shares.

As on May 24, RIL had purchased a total of 19.22 million shares, shows data on the Bombay Stock Exchange website. Rough calculations show the company has so far bought shares worth Rs 1,364 crore, about 13 per cent of the maximum buyback amount. RIL’s Rs 10,440-crore buyback offer is the largest ever in India Inc’s history. The programme started on February 7 and is scheduled to continue till January 19, 2013.

According to the new rules, a company will have to buy back at least 25 per cent of the maximum buyback amount. Though the buyback programme began in February, it gained momentum only in May. The company picked up 12 million shares this month as against three million in April. Interestingly, a fourth of the share trading volume in the RIL counter this month has come from the buyback.

But the buying has still done little to boost the stock price, almost unchanged at Rs 695 per share. However, the rising momentum is seen as a positive development by analysts, who feel it will protect the stock. Foreign broking house Morgan Stanley has upgraded RIL from ‘underweight’ to ‘equal weight’. The US-based firm has said that with the buyback programme gaining momentum, one will see little downside for the stock. And, that the stock trading at multi-year lows make its valuations “compelling”.

On May 16, RIL shares fell to a three-year low in intra-day trade, at Rs 673, on production concerns at its D-6 block in the Krishna-Godavari (KG) basin. Recently, the company had revised downward the assessment of its proven natural gas reserves at the block.

The stock closed on Tuesday at Rs 700.95, down Rs 0.70, or 0.1 per cent. S P Tulsian, an independent equity analyst, said chances of further downside to the stock from the current levels were minimal due to the buyback. “The stock is looking attractive in terms of valuations and Rs 700 looks to be a strong support level,” he said.