Reliance Industries announced that the board approved a buyback of shares at Rs 870 per share. The current share price is Rs 793 per share. The company will buy 12 crore shares worth Rs 10,440 crore. This is the fourth time the company has announced a buyback of shares.
The company has to buy 25 per cent of the total offer or 3 crore shares in the offer, under existing rules on buyback of shares.
The street was expecting Reliance Industries to announce a buyback of 10 per cent of equity or about Rs 14,000 crore of shares buyback. However, the company’s buyback offer is less than the street expectation. The buyback share price typically becomes a floor price for the street as this is the company’s assessment of the value they see in their businesses.
Experts say that Institutional investors could submit their shares in the offer. They point out that the company’s plan to announce the buyback to coincide with the results announcement would limit the downside in the share price. RIL’s net profit for the December 2011 quarter is the lowest in two years. The company’s share price has underperformed the BSE sensex over the past one year.