ril buyback
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RIL BUYBACK
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Definition
The repurchase of outstanding shares (repurchase) by a
company in order
To reduce the number of shares on the marketTo increase the value of shares still available (reducing
supply), or
To eliminate any threats by shareholders who may belooking for a controlling stake.
To increase the returns for the shareholders
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Types of Buyback
Open Market
They just declare that they are going to buy shares fromthe stock market, and
there is nothing that you have to do here (except perhaps
hope for a gain in share price). It involves only the brokerage charges which are to be
paid to carry out the buying process from the shareholders
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Buyback through tender
Sending a tender form to all its shareholders withcomplete instructions
Filling up a Delivery Instruction Slip with the trading
and demat account details
Calculating how many shares it got and in what
proportion can it carry out the buy back.
Notified of the number of shares that are accepted
Money will either be deposited directly electronicallyor be sent by a check
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RIL Buy Back facts
Buy Back will be executed through the open market.
The companys net profit in Dec 2011 is the lowest in two
years.
The Maximum Price is set at Rs.870/-
There is no guarantee that prices will rise above Rs.870/-
The maximum size of the buyback, Rs 10,440 crore
The buyback is worth 7% of its net worth.
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What Stock market gurus feelabout buybacks
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Warren buffet
a company can add
value to its shares by
buying some of themback:
a. When it has surplusfunds.
b.When it can buy themback at a price below
intrinsic value.
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Peter lynch
loves companieswhere the senior
managementsbought stocks oftheir own companies
Is the simplest, best
way a company canreward its investors.
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Benjamin Graham
It was thought to be 'in theinterests of the corporation'to acquire the stock at the
lowest possible price. consequence of this idea is
that those stockholders whosell their shares back to thecompany are made to sufferas large a loss as possible,for the presumable benefit ofthose who hold on.
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Analysis Of Ril Buyback
Historical Share Price
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Date Adj Close*
27 Jan, 2012 817.00
25 Jan, 2012 791.00
24 Jan, 2012 781.5023 Jan, 2012 772.00
20 Jan, 2012 794.10
19 Jan, 2012 784.40
18 Jan, 2012 773.65
17 Jan, 2012 740.30
16 Jan, 2012 715.25
13 Jan, 2012 731.95
12 Jan, 2012 740.00
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Key Financials(in Rs crores)Financials 2011 2010
Cash 604.57 362.36
Current Assets 47871.89 39004.19
Financials Dec11 Sep1
Other incomes 1717.00 1102.00
Operating Profit 7285.00 9844.00
Gross Profits 9002.00 10946.00
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Key Findings
Ril Believes that stock is valued below its intrinsic value of
Rs 870/-
The purpose of the buyback is to protect reliance shares
from market fluctuations.
The price of reliance stock will not rise above 870/- and
may even fall after Feb.1st due to over subscription
Promoters holding will increase
In Short term may Improve financial Ratios
Long term may impact profitability
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