Nevin John & P B Jayakumar in Mumbai
Foreign institutional investors such as Morgan Stanley, Merrill Lynch and
Citigroup have sold off their holdings in Anil Ambani-promoted Reliance
Infrastructure (R-Infra) after the company opened a buyback offer in March this
year.
Morgan Stanley is the latest FII to sell its stake (4.18 per cent) to the
company in the September quarter, said sources in the know.
After the company began the Rs 800-crore (Rs 8 billion) buyback in early
March, the FIIs' total holdings in it have fallen to 16.89 per cent until
September 2008 from 20.87 per cent in December 2007.
According to the latest announcement, R-Infra has spent Rs 711 crore (Rs
7.11 billion) for the buyback of 7,260,000 equity shares until November 7. The
company is expected to complete the first tranche of the total Rs 2,000-crore
(Rs 20 billion) buyback by March 4, 2009.
An R-Infra spokesperson said, "The company's buyback of shares is aimed
at reinforcing investors' confidence. These shares are bought from the open
market through a transparent process and are not dependent on the sellers."
"The company is cautious about the pullback of FIIs, even though it
happens to most firms, especially after the economic downturn. These FIIs sold
off their stakes partly to the company and the remaining in the open market.
Whenever FIIs sold shares heavily, the company held back the buyback for
restricting the stock fall. As the situation is slightly improving, R-Infra is
looking to increase the buyback since the share price is around Rs 600, which
is considerably lower than the expectation of the company," the spokesperson
added.
Since the shares shot up by 16.28 per cent last week, the existing FIIs
in the company, including Bank of New York and Natixis, are regaining
confidence and continue holding their stakes, sources added.
Bank of New York has a 2.58 per cent stake, though it sold off about
500,000 shares in the second quarter, when FIIs were exiting the domestic
market in panic. Natixis holds 1.49 per cent stake in R-Infra, according to the
information available on the Bombay Stock Exchange.
Merrill Lynch and Citigroup had exited by selling off their 1.37 per cent
and 1.51 per cent stakes, respectively, in the June quarter. With the buyback,
the promoters' stake in the company, formerly known as Reliance Energy [Get
Quote], has increased to 36.83 per cent from 34.68 per cent.
According to the earlier plan, the company wanted to buy back 50
lakh-plus shares at a price not exceeding Rs 1,600 a share, aggregating to Rs
800.06 crore (Rs 8 billion), to raise the promoters' stake in the company.
However, the fall in the share price has helped the company buy back more
shares with the announced fund. If the situation continues, the company would
quickly finish the first tranche and begin the second round of the Rs
1,200-crore (Rs 12 billion) buyback, said sources.
http://www.rediff.com/money/2008/nov/11reliance-morgan-merrill-lynch-citi-exit-r-infra.htm
When prosperity comes, do not use all of it.
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