Corporate India seems to be heavily into reverse gear with promoters locking up value for themselves by merging group firms and buying back shares from the public at attractive low prices amid the meltdown at the bourses.
Analysts believe companies hit by the slowdown are trying to shore up their resources by merging group firms and promoters are increasing their holdings in the companies by buying shares at the lower valuation in current times.
Last week, Reliance Industries announced merging of Reliance Petroleum with itself which would create one of the world's largest refineries.
RIL Chairman Mukesh Ambani had said that the merger of RIL and RPL would enhance value for shareholders of both the companies.
Further, diversified conglomerate Jaiprakash Associates is also in the process of getting consent for merger of group firms Jaypee Hotels, Jaypee Cement, Jaiprakash Enterprises and Gujarat Anjan Cement with itself.
Besides, according to information available on the Bombay Stock Exchange, over 31 companies have made buyback offers to purchase back the shares worth a whopping over Rs 3,535 crore.
"Buyback offers are on the rise as promoters are seeing this as an attractive time to shore up holdings in companies at cheap prices," a leading market analyst said.
Reliance Infrastructure has already completed its first tranche of buyback and is now in the process of purchasing next batch of shares worth Rs 700 crore. The second buyback offer has started from February 25 and will continue till April 16.
In February, Reliance Infra closed the first phase of its buyback programme and bought back 87.60 lakh equity shares of Rs 796 crore. After which, the promoter holding has risen to 39.04 per cent, from 37.33 per cent in the December quarter.
The company which are buying back shares from the public include TV Today, India Infoline, IPCA Labs, Monnet Ispat, DLF, Bosch Ltd, Godrej Consumer and EID Parry.
Meanwhile, initial public offers, which had been the stars during the bull run, have lost their charm and in the first two months of 2009 only one firm Edserv Softsystems has dared to enter the stock market.
Likewise, when the bull run was at its peak a host of companies had demerged their subsidiaries and listed them as separate firms on exchanges to mop up funds from investors.
Marketmen said several other firms are considering merging group companies as their earnings in the third quarter were disappointing and amalgamation may reduce their losses.
In 2006, RPL which was established to set up a new mega refinery complex, was listed on the bourses as a separate entity after an initial public offering that raised over Rs 8,100 crore.