Reliance Industries (RIL) today said it has bought back stocks worth Rs 1,929 crore since the launch of share repurchase programme in February -- achieving 22.5% of the targeted amount.
Mukesh Ambani-led RIL that began a buyback programme of Rs 10,440 crore early this year, has so far purchased shares to the tune of Rs 1,929 crore through open market transaction.
"We have, to date, bought back 2.7 crore shares at a cost of Rs 1,929 crore - this represents 22.5% of the cap set by the Board in terms of number of shares," RIL Chairman and Managing Director Mukesh Ambani said while addressing to the company's shareholders.
"The buyback represents highly accretive use of cash by the company. It will supplement earnings growth from operations, for higher EPS, (earning per share)in the near future.
"We are also reinvesting our cash flows at accelerated pace in new projects and new businesses. These will bear fruition and growth in earnings over the next few years," he added.
Although, the buyback started in February, it gained momentum last month, when it has bought maximum shares.
Market experts are of opinion that the oil and gas giant is buying back shares aggressively from the open market with an aim to shore up stock valuations.
However, the buyback programme appears to have provided little respite to the stock price, which has fallen around over 15% since the share repurchase offer announced, under performing the benchmark Sensex that has declined more than six% during the period.
Although, RIL had gained over six% since it touched 52-week low of Rs 671 on May 8.
The stock had received a setback after credit rating agency Moody's downgraded RIL as credit negative following the downward revision in the company's assessment of natural gas reserve.
RIL shares were trading at Rs 723.05 today, which is much below the maximum price of Rs 870 per share fixed for buyback.
"Reliance has underperformed the markets during last few years. It is not able to perform on the back of the falling output from KG¿D6. The progress of work seems to be very slow.
"Another problem with the Reliance is that it is not able to use cash reserves in a very effective manner," Wellindia Vice-President Research Vivek Negi said.
"Fundamentally, the company is still doing average. But there is no clarity on the future prospects of the company," he added.
RIL's Rs 10,440-crore buyback offer could be the biggest ever in the history of Indian capital market. The buyback programme, which commenced on February 7, is scheduled to continue till January 19, 2013.
In December, 2004, RIL had offered to buy back 10% of its equity at Rs 570 per share.
According to CNI Research Head Kishor Ostwal, the success of buyback offers depends on many factors like willingness to buy the proposed shares and premium sustainability.
"In fact, many corporate houses failed to utislise the entire corpus targeted for the purpose in past and many firms even discontinued buying activities despite shares being available well below maximum buyback price," he added.
RIL's net profit declined to Rs 20,040 crore in the year ended March 31, 2012 as against Rs 20,286 crore in the preceding fiscal. Eeven though its revenues rose to Rs 3,29,904 crore in FY12 from Rs 2,48,170 crore in the previous fiscal.
The company's profitability was hurt by weak refining margins and declining gas output from its offshore fields.
The company's cash and bank balance stood at Rs 39,598 crore as of March, 2012.
