Reliance Industries approves share buyback
Monday, 27 December 2004, 08:00 Hrs
MUMBAI: Corporate behemoth Reliance Industries Monday approved one of corporate India's largest share buyback programmes with a view to curbing volatility in company stocks that have been badly hit by an ownership slugfest. But in a clear signal that the proxy war between the Ambani brothers, who control the country's largest business conglomerate, is far from over, Reliance Industries vice chairman Anil Ambani abstained from voting on the buyback. The buyback resolution, however, got passed as a majority of the 12-member board supported the move. The buyback price has been fixed at 570 per share, which is sharply higher than the analyst expectations and the current trading prices. The price is at nine percent premium to Friday's closing price of Reliance Industries stocks. Shares of all Reliance group companies, which witnessed institutional selling pressure in the early trade Monday, staged a smart rally as soon as the news of buyback approval reached the trading ring. "The buyback approval comes as a major boost for the stock market and especially for the counters of the Reliance group companies," said Ambarish Baliga, vice president of Karvy Stock Broking Ltd. "The buyback price has clearly breached the street expectations and it comes as a major relief for investors. I think the move will significantly curb volatility on the Reliance group counters," Baliga told IANS. Reliance, which has a significant weightage in the stock market index, said the total buyback amount would not exceed 29.99 billion ($662 million). It is expected to be one of the biggest share buyback programmes in the Indian corporate history. A section of dealers say that despite the approval of the buy-back programme, Anil's decision to abstain from the voting process will continue to hover over the trading ring in the days ahead. Shortly before the commencement of the board meeting here, Anil, who is locked in an ownership slugfest with his elder brother and chairman Mukesh Ambani, said he was neither informed nor consulted about the share buy-back programme. Shares of all Reliance group companies were badly hit by Anil's surprising comments in the early trade Monday with flagship Reliance Industries falling by as much as over one percent. In a strongly worded message minutes before the commencement of the crucial Reliance Industries board meeting, Anil said the group should address other issues than a buyback programme. "I have been deeply saddened and anguished by the events of the last few weeks," Anil told media persons outside the firm headquarters, located at posh business district Nariman Point here, before the commencement of the board meeting. "I was not consulted nor informed before informing the stock exchanges about the buyback programme," he added. Anil said a buyback programme at this stage was "completely inappropriate" and that the group need to address other issues. Referring to the movement of shares of Reliance Industries in the past few weeks, the younger sibling said the volatility of the stocks show there was more than what meets the eyes. Reliance Industries sources say Anil's opposition to the buyback programme is not in the interest of millions of shareholders. Experts say Anil's admission that he was not consulted about the buyback programme raises serious questions about the issues of corporate governance within the Reliance business group. "He (Anil) is the vice chairman of Reliance Industries and if its true that he wasn't consulted before the share buyback decision, then it is a very serious issues," said a corporate sector analyst, who didn't want to be named. "I think the market regulator (Securities and Exchange Board of India) will take note of this and order initiate some steps to ensure that the corporate governance norms are not violated by the country's largest business house."