The buyback will start today and end on January 20 of next year. RIL would buy back up to 12 crore equity shares worth Rs 10,440 crore from the open market at a maximum price of Rs 870 apiece in its first share buyback since 2005.

"The board of directors of RIL at its meeting held today unanimously approved the buyback of up to 12 crore fully paid equity shares at Rs 10 each, at a price not exceeding Rs 870 per equity share, up to an aggregate amount not exceeding Rs 10,440 crore, from the open market through the stock exchanges," the company said in the statement on January 20.

Share buyback is the repurchase of shares by a company from the market to reduce the number of available shares. The reason why RIL is indulging in the buyback activity could be gauged from its poor third quarter showing.

Buyback is done when a company feels its shares are undervalued. For instance, RIL's share prices have fallen 35 per cent in last one year.

As per SEBI, the maximum spending limit allowed is 10% of company's net worth. RIL is planning to spend Rs 10, 440 crore which works out to 7% of its net worth.

On Wednesday, the shares of the company on BSE were trading higher at Rs 825 up by 9.55 points or 1.17% at 11.10 am IST.

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Sources from Dion Global