In its efforts to further boost the confidence of the investors, Reliance Energy Ltd prposes to buyback shares from the open market. The Board would meet on 5th March,008 to decide on the quantum of purchase.
Earlier, Reliance Power in which Reliance Energy has a major stake, had resolved to issue three bonus shares for every five shares held. The company had resorted to this move to restore the confidence of the Investors who had heavily invested in its Initial Public Offering which met with disastrous consequences when it was listed in the market, by substantially losing its value.
Consequent to the announce-ment of the bonus ratio, Reliance Power was quoted above the issue price. Similarly, with the announcement of the buyback, the price of Reliance Energy rose by more than 4%.
Market anaylsts expect the Company to buy upto 5% of the paid up equity. The company has a cash reserve of Rs.11,000/-Crores, a net worth of Rs.10,000/-Crores and a market capitalisation of Rs.40,000/-Crores. Since the buyback price is expected to take place at a premium over the prevailing market price, it would raise the valuation of the Company. Correspondingly, the promoters stake would also go up.
The objective of the buyback is to send a message to the investors that the Company is bullish about the growth prospects.
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