Reliance Energy Ltd(REL)Buyback

Reliance Energy on Mar5th said it would spend up to $500 million to repurchase or buyback shares.

The Mumbai-based company is offering 1,600 rupees ($39.81) a share, a 9.6% premium to its closing price Wednesday on the Bombay Stock Exchange(BSE). The buyback is to “reduce short-term volatility in the company's share price and deter speculative activity,” the company said in a press release.

Reliance Energy was one of the best performing stocks on the Bombay Stock Exchange(BSE) last year, quadrupling in value on the promise of increased government spending on power generation. But it has fallen 32% this year because of huge sell-off in equities across Asia.On Wednesday, Reliance Energy fell 3% to 1,459.45 rupees ($36.31).

The buyback is expected to restore some stock market luster to companies of the Anil Dhirubhai Ambani Group(ADAG).

Last month, Reliance Power shares went down upto 17% on their first day of trading, despite the tremendous anticipation for the $3 billion IPO, India’s largest ever.

Another Ambani company, Reliance Communications, has filed with the stock market regulator to sell shares amounting to 10% of the tower business Reliance Infratel. The sale is expected to raise $1 billion to $1.5 billion. It is also considering listing its newly formed Reliance Globalcom unit.

Reliance power bonus 3:5

The board of Reliance Power Ltd approved a 3-for-5 bonus share.The bonus issue of three shares for every five held will bring down the cost of Reliance Power shares to Rs269 for retail investors, as against a discounted offer price of Rs430, and Rs281 for institutions compared with an offer price of Rs450, said Anil Ambani, chairman, Reliance-Anil Dhirubhai Ambani Group (R-Adag), in a conference on Sunday.
The founder-promoters of the company, including Ambani and Reliance Energy Ltd, who together hold 90% of Reliance Power’s equity, will not be issued bonus shares. The promoters, however, had acquired shares in Reliance Power at Rs17 each.

Ambani, also the non-executive chairman of Reliance Power, said he was giving up 2.6% of his shareholding in Reliance Power to Reliance Energy, which owns about 45% of Reliance Power, so its ownership structure remains intact. After the bonus issue and this transfer, Ambani’s stake in Reliance Power will fall 5 percentage points to 40%, while public shareholding will rise to 15%.

Reliance Power has sought an enquiry by the Securities and Exchange Board of India (Sebi), the stock market regulator, into “hammering” of the stock price, Ambani said.

Reliance Power plans to set up 13 plants with 28,200MW of generating capacity in five years, one-third of India’s planned projects in power. However, the first of these plants will only start production in 2010 and the company is unlikely to report strong profits for five years.