By Manash Goswami
Feb. 26 (Bloomberg) — Reliance Energy Ltd., India’s second-biggest utility, said it plans to consider a buyback of shares, two days after a unit agreed to give free stock to bolster investor confidence.
The board will take up the plan on March 5, the Mumbai- based company said in a release to the Bombay Stock Exchange today. Unit Reliance Power Ltd. said Feb. 24 it would give three shares for every five held after the stock slumped on listing.
Billionaire Anil Ambani’s Reliance Energy, which quadrupled in value in 2007 to become the biggest gainer among Indian benchmark stocks, has dropped 21 percent this year compared with a 12 percent decline in the key index. Reliance Power, which attracted a record $189 billion worth of bids, slumped 17 percent when it listed on Feb. 11.
“It’s in line with creating confidence among investors to tell them that as far as the group is concerned, there is nothing wrong,” said K.K. Mital, chief investment officer of Escorts Asset Management Ltd. in New Delhi. “Reliance Energy stock has seen a lot of volatility with swings up to 30 percent.”
Reliance Energy rose 74.55 rupees, or 4.6 percent, to close at 1,697.25 rupees in Mumbai trading, the most since Feb. 14, after gaining as much as 5.5 percent to 1,711.9 rupees today.
Reliance Power, which raised $3 billion last month in India’s biggest initial public offering, yesterday closed above 450 rupees, the price at which the stock was sold, for the first time. Individual investors paid 430 rupees for each share in the IPO and institutional investors paid 450 rupees.
“I have been personally concerned by the notional losses arising to millions of our investors,” Ambani said on Feb. 24. “The board endorsed my concern and approved the bonus issue.”
Ambani plans to set up 13 plants with 28,200 megawatts of generating capacity in five years, a third of India’s planned new projects.
To contact the reporter on this story: Manash Goswami in New Delhi at [email protected]
Source : bloomberg.com
