Hot News : REL mulls share buy back

You find the complete news report below but what the heck is Mr. Anil Ambani doing? Does he wants to be in the media limelight all the time or is he restless that his company shares are trading well below their worth? I believe he is doing too many things too soon. Not good!! RK RentalAndRealEstate.com Source : Business Standard Board meeting on March 5 to consider the proposal.

The Anil Dhirubhai Ambani group-promoted Reliance Energy Ltd (REL) has proposed a buyback of its shares.

The management has not stated any particular objective for buyback, but a press release said it has convened a board meeting on March 5, to consider the proposal.

The move comes just two days after Reliance Power, another group company in which REL owns 45 per cent, offered bonus shares to its shareholders in the ratio of 3:5.

According to industry watchers, one reason for the buyback could be to keep the share price from falling. The REL stock has lost about 36 per cent from its peak of Rs 2,631.70 in January and it currently trades at Rs 1,697.25.

Typically, managements initiate a buyback if they believe their companies’ shares are undervalued and that the market price does not reflect the fundamentals. By supporting the stock price at a certain level, the company can absorb any selling by investors, they point out.

Buyback options, however, require spare cash. The company’s reserves and surplus were approximately Rs 9,000 crore at the end of March 2007.

Going by the market regulator’s rule that companies can invest up to 25 per cent of their reserves on share buybacks, the amount spent on acquiring the shares could be in the region of Rs 2,250 crore.

The Rs 6,575-crore power utility was sitting on cash and cash equivalents of approximately Rs 7,500 crore, according to the balance sheet for March 2007.

REL had consolidated cash and bank balances of Rs 2,226.33 crore and quoted investments of Rs 4,446.33 crore, the market value of which is mentioned as Rs 4,550 crore. It also has some additional investments.

However, the cash and cash equivalents could be higher at about Rs 10,000 crore, as at the end of December 2007, assuming some infusion of funds by the promoters and a rise in the value of investments.

REL’s paid-up equity as of March 2007 is Rs 228.57 crore and has increased to Rs 236.53 crore as on February 4, 2008, with the conversion of some foreign currency convertible bonds (FCCBs) into shares.

REL’s subsidiary, Reliance Power, raised about Rs 11,000 crore through an initial public offer last month at a price of Rs 450 per share and Rs 430 per share for retail shareholders.

The promoter and promoter group hold 34.68 per cent in REL, with the majority 34.04 per cent with Anil Ambani’s AAA Project ventures Pvt Ltd.

While Anil Ambani’s personal holding is just 0.06 per cent (139,437 shares), his son Jai Anmol A Ambani and wife Tina Ambani hold 0.05 per cent each, according to the shareholding information given to the stock exchanges as in December 2007. Institutional investors hold 44.74 per cent in REL.

While announcing the bonus shares for Reliance Power, Anil Ambani had said he would transfer 2.6 per cent of his personal holdings in Reliance Power to REL, worth Rs 4,200 crore.

This move was to allay concerns that the shareholders of REL would suffer because the bonus issue was restricted only to non-promoters of Reliance Power.

Recently, fast moving consumer goods major Hindustan Unilever completed its buyback of shares, spending Rs 626.28 crore picking up and30 million shares at an average price of Rs 207.13 per share.

Indian Stock Market News - 25 Feb 2008 : Expect higher opening with other Asian Markets opening in positive

Weekend News round up is below. The one big news was the issue of bonus shares by Reliance Power in the ratio of 3:5 and the other news being Anil Ambani crying foul over the hammering of the Reliance Power shares on the first trading day. He seems to think there is a conspiracy behind it. I will do the same if I were him, People invested in Reliance Power because of the Ambani name tag and have lost faith and money once it got listed. So its a black mark for him and the next time there is a IPO from him there will not be such a enthusiasm

Anyhow, the Indian markets should open higher following the global cues ( as analysts say). But how the week shapes up is anybody's guess. I am planning to sell off those companies which I think are over-valued on every rise and may buy other good stocks at a lower prices. What to do I was also greedy in going for the stocks that were riding the wave. Bought them at a high price and they are now 10-20% down.

Sify
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Govt asks ICAI to prepare report on IPO valuation
In the wake of controversy relating to valuation of public issues, the government has directed the apex body of chartered accountants, ICAI, to conduct a study on the initial public offer pricing and suggest ways for protecting the interest of investors.

50% of malls may shut down by '10, hype to go
Consolidation in the retail industry would result in nearly 50 per cent of the malls shutting down by March 2010 and the hoopla surrounding the sector would considerably subside by then, a brand expert has said.

The Financial Express
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Anil adds 3:5 Power to shares
In an attempt to compensate investors for the poor listing of its shares, Reliance Power proposed an issue of free bonus shares to all investors, excluding the promoters, in the ratio of 3:5. This apart, the promoter and chairman of the company, Anil Dhirubhai Ambani, announced a voluntary contribution of 2.6%

Anil insists Sebi probe into RPower stock hammering
Anil Ambani, promoter and chairman of Reliance Power Ltd reiterated his demand for an investigation by the capital market regulator Securities and Exchange Board of India into the hammering of the RPower stock following its listing on the bourses on February 11

Economic Times
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Budget is the key event for market watchers
Market watchers are hoping for some positive measures from the finance minister as market analysts are expecting that the Budget might cut corporate income tax

Rel Power bonus issue cuts losses by 40%
The Board at its meeting approved a bonus issue wherein 3 shares would be allotted for every 5 held by the non-promoter shareholders. Special: Reliance Power IPO

India riding an optimism bubble
From capital markets to cricketers, real estate to HR, every asset category seems to be trading several times above fair value

India Inc's business confidence rises by 5.4%
If the positive sentiment persists despite the turmoil in the capital market, corporate earnings may be back on track in the coming quarters.

NSE deactivates 372 F&O terminals in Jan
Terminals of 372 members in the futures and options segment were deactivated for a day during January due to margin payemnt failure.


International Markets
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Japan stocks up over 2 pct, subprime worries ease

Singapore share prices opened higher Monday, following Wall Street's rally on Friday

As China's factory floors feel the pressure from spiralling costs, there is growing nervousness in the rest of the world that the Asian giant's next big export could be inflation


RK

RentalAndRealEstate.com - Rental and Real Estate Classifieds and Social Network

http://yourmitra.wordpress.com

Reliance Power bonus news - Why is it required?

Is Mr. Anil Ambani's ego behind the issue of bonus shares? Or do they really care for the people who trusted in their IPO?

He had no reason to do this but its a welcome gesture irrespective of motives behind it. It will benefit all the investors who lost money on the first day of trading.

RK
RentalAndRealEstate.com - Rental and Real Estate Classifieds and Social Network