Reliance Energy Gains Most in Two Months on Buyback

March 25 (Bloomberg) -- Reliance Energy Ltd., India's third-biggest utility, rose the most in two months after starting a buyback of shares today.

The shares gained as much as 169.1 rupees, or 15 percent, to 1,320 rupees on the Bombay Stock Exchange. The start of the offer was postponed from March 17, the Mumbai-based company said in a filing to the exchange yesterday, without explaining.

Reliance Energy, India's best-performing benchmark company last year, approved the buyback after shares in the group slumped this year. Chairman Anil Ambani last month offered free shares to investors in his generating business, Reliance Power Ltd., after the stock slumped 17 percent on listing.

Reliance Energy plans to spend 20 billion rupees ($499 million) on the buyback at a maximum price of 1,600 rupees apiece. The price represents ``a premium of over 30 percent to the low of 1,225 rupees recorded during the calendar year 2008 and a premium of approximately 10 percent to the closing share price on the date of the board meeting,'' the company said on March 5.

The last date of the offer is March 4. The buyback, aimed at reducing ``short-term volatility'' and deterring ``speculative activity,'' will be done in two phases, with 12 billion rupees being spent in the second phase, the company said.

Reliance Power plans to issue three shares for every five held. The free shares won't be given to Ambani and the founder group, including Reliance Energy, which hold a combined 90 percent stake.

Share Gains

Reliance Energy gained 149.25 rupees, or 13 percent, at 1,300.15 rupees at the 3:30 p.m. local time close, its biggest advance since Jan. 23. The exchange's 30-share, benchmark Sensitive Index gained 6.1 percent to 16,217.49 points. Reliance Power rose 13.05, or 4.3 percent, to 319.55 rupees.

The company plans to change its name to Reliance Infrastructure Ltd. to reflect the current nature of its businesses. The power producer is working on construction contracts worth 80 billion rupees, including a metro rail and a bridge in Mumbai and a 100-storey office tower in the southern city of Hyderabad, the company said on March 10.

To contact the reporter on this story: Manash Goswami in New Delhi at mgoswami@bloomberg.net.