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The Reliance Buyback In 2004-05 Analyzed


The last time Reliance bought back shares was in 2004-05, when they bought just Rs. 150 cr. worth shares. The actual announcement was in December:

Max amount to be used: Rs. 2999 cr.

Max price to be paid: Rs. 570. (The share has gone through one bonus issue, so effective comparable price today is Rs. 285)

And look what happened:


In fact, if you look at the timing of the purchases, and the price, it’s quite interesting:


The buyback went on for just 20 days – after Jan 20, no further shares were bought. Even when the Reliance share price was below the Max price.

It would be fairly accurate to believe that the share buyback didn’t really intend to use the full cash announced, or to buy when the stock was below the target price; they didn’t buy even though the share was considerably below it, near the 500 levels, a few months later.

What it also means is: any announcement for a market buyback should be taken with a pinch of salt. (Much of the upmove you see was reflected in most Nifty stocks during the time; The Nifty went up more than 45% from the Jan 2005 lows) Thought I’d note this for those that are expecting fireworks in the announcement tomorrow.


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