January 18, 2012: Reliance Industries Limited (RIL), the largest company in India, announced a possible buyback that created excitement and interest causing a ~5% rally in the stock on the same day. This buyback may emerge amongst Corp India's largest buybacks. The previous buyback undertaken by RIL was in Dec 2004 and was close to ~Rs.150 crores. The buyback was meager compared to its share capital. However, the move instilled confidence and send a strong signal. Years later, 2012, we see the adage: history repeats itself. RIL's March 31, 2011 financials state share capital plus reserves at ~ Rs 1,46,000 crores. It will be interesting to see the kind of share repurchase RIL engages in. The signal is crystal clear: Management believe the stock is undervalued. And given their cash reserves this is a smart move. Besides being a strong and definite statement to the market, it can prove to be a great sentiment shift. Will brokers start to issue buy calls? What will be the size of the buyback program? Stay tuned :)
No comments:
Post a Comment