RIL steps up buyback, stock falls to 3-year low

The Mukesh Ambani-led Reliance Industries Ltd (RIL) has upped the buyback ante. But the company’s effort has done little to support the company’s sagging share price.

In the past few trading sessions, the oil and gas major has substantially increased the quantum of share buyback. This month, on seven occasions RIL has bought an average of 600,000 shares a day, more than double of what it bought in April.

Shares of India’s second-most valued firm on Monday ended down Rs 16.2 or 2.32 per cent to close at Rs 681, its lowest since March 2009. The stock received a setback after it was downgraded to negative by credit rating agency Moody’s, due to falling gas output and lower cash flows.

Interestingly, the company purchased 800,000 shares each on three trading sessions last week, accounting for about a fifth of total trading volume on these days.

However, the buyback has provided little relief to the stock price, which has come off nearly 17 per cent in one month, underperforming the benchmark Sensex which has declined nine per cent during this period.

Last week, RIL revised downward the assessment of its proven natural gas reserves by 6.7 per cent at its D6 block in the Krishna-Godavari (KG) basin. Production at the KG-D6 block has fallen substantially in the past year.

The company’s Rs 10,440-crore buyback programme, which had started on a slow note, seems to have gathered steam in the past few weeks.

As on May 10, RIL had purchased a total of 11.43 million shares, data from the BSE website showed. According to back-of-the-envelope calculations, the company has so far bought shares worth over Rs 800 crore as part of its buyback programme, the largest ever in India Inc’s history.

The buyback programme, which started on February 7, is slated to continue till January 19, 2013.