REL buyback at Rs 1,600

Anil Dhirubhai Ambani Group (ADAG) company, the Rs 6,576-crore Reliance Energy (REL) today announced that it would buy back its shares through open market purchases at a maximum price of Rs 1,600 per share.

The announcement comes just after REL subsidiary Reliance Power, which listed below its offer prices on February 11, announced a bonus of 3:5 and ahead of more IPOs from the ADAG stable.

REL plans to spend up to Rs 2,000 crore to buy back its outstanding equity shares in two phases, after a proposal to this effect was approved today by the REL board.

A company press release said the price of Rs 1,600 represents a 30 per cent premium over the low of Rs 1225 recorded in 2007 and a ten per cent premium to the closing price on Wednesday.

The REL stock lost 3 per cent on Wednesday closing at Rs 1459.45 and this is the lowest closing price for REL in 2008. The price of Rs 1,225 was an intra-day low which the stock hit on January 22, 2008.

In the first phase, the company will spend Rs 800 crore, which amounts to 10 per cent of the company ' s equity and free reserves.

For the second tranche of Rs 1,200 crore, which amounts to 15 per cent of the equity and free reserves of the company, REL will seek the necessary approvals from shareholders.

The shares will be bought on both the National and the Bombay Stock Exchanges.

REL' s fully-diluted equity capital is Rs 279.53 crore.

This is the second buy-back offer by REL. It had announced a buyback in June 2004 for Rs 350 crore up to a maximum price of Rs 525 shares.

The offer was extended till June 2005 but the company ' s balance sheet for 2004-05 said no shares were bought back.