Reliance Industries today sold 2,675 cr. of its own stock at an average price of 1,035 per share, to fund . LiveMint says the money will most likely go to fund the LyondellBasell acquisition ($10-12 billion, or 45-55K cr).
Treasury stock is when a company owns it’s own shares – not usually permitted, but in this case, Reliance got them when it merged with Reliance Petroleum I in 2002 (as opposed to RPL II in 2009). Investors remember that Reliance sold a good chunk of what it owned of the RPL II shares at 214 or so, a few weeks before the big crash in 2008. That shows they knew a little bit of timing. Of course, if the RIL management was that smart, they would have sold the treasury stock too at those rates – when RIL quoted at a bonus adjusted price of Rs. 1650.
It’s tough to read anything into treasury sales. If anything it’s good to have cash, one would think, especially when they have quite a lot of debt in a potentially rising-interest-rate scenario.
>Probably the S O B just thought up a new(and legal) way to get out of the excess stock piled up by his market "operations" to prop the price this year.
01.05.10 at 5:57 AM
>Rules in India do not permit a company to own its own stock (treasury stock)- either by way of a buyback,or when it merges a subsidiary/ associate with itself. In this case, RIL created a separate trust called the Petroleum Trust and this trust held the shares, not the company. It is another matter, that the company which owns this trust, is a part of the promoter group.(Check this http://www.ril.com/html/investor/shareownership.html). So, this stake sale will be reflected in the Consolidated account.
The RPL stock sale that you are referring to, is the second RPL ( the one that was merged recently. Post merger of RPL 2 with itself, RIL extinguished the treasury shares), while the treasury stock relates to the merger of RPL 1 (in 2002) with RIL.
01.05.10 at 2:28 PM
>I believe doing geneological tree study for the "Reliance" would fetch one a PhD.
01.11.10 at 12:09 PM