Indian energy conglomerate Reliance Industries reported its first quarterly profit drop in more than two years, and moved to bolster its underperforming shares by announcing a share buyback of up to Rs104.4 billion ($2.1 billion).

Reliance, India's biggest company by market value, said it would buy back up to 120 million shares at a maximum price of 870 rupees, its first share buyback since 2005 and the biggest ever in India.

At the maximum price, the buyback represents an almost 10 per cent premium to Reliance's closing share price of Rs792.65 yesterday.

Reliance, which has a market capitalisation of about $51 billion, said it held cash and cash equivalents of $14 billion as of the end of December.

"Historically, whenever there are sugar-coated cookies such as a buyback, it's a prelude to bad news," said Mohit Mirchandani, head of equity at brokerage Religare's portfolio management business.

"But it's also a positive indicator, that they are close to the bottom of the petchem business cycle. Smart investors would look to buy the stock at this point," said Mirchandani, whose firm manages about $400m.

Controlled by Mukesh Ambani, the world's ninth richest person according to Forbes, Reliance's market value tumbled 35 per cent in 2011.

The stock has also underperformed the main Mumbai market, which fell nearly 25 per cent  in the same period.

Reliance posted a 14 per cent  fall in October-December net profit, as refining margins fell sharply, the company said.

Net profit fell to Rs44.4 billion for the fiscal third quarter ended December 31 from Rs51.36 billion a year earlier. Net sales rose 42 per cent to Rs851.35 billion.-Reuters