Larsen & Toubro sets ball rolling on Rs 10,000 cr buyback

Larsen & Toubro sets ball rolling on Rs 10,000 cr buyback

Nearly four years after its earlier aborted attempt, Larsen & Toubro (L&T) on Tuesday announced a buyback of shares of up to Rs 10,000 crore. The company said it would buy back 33.3 million equity shares of a face value of Rs 2 each, at a maximum price of Rs 3,000 per equity share. This represents 2.4% of its paid- up capital.

Ahead of the announcement, the L&T stock closed Tuesday’s session at Rs 2,561.95 on the Bombay Stock Exchange, down 1.67% over Monday’s close. The stock has gained close to 44% over the past year.

Among other measures L&T is taking to improve profitability is to exit asset-heavy businesses and pare working capital which is now down to 16% of revenues down from 26%. “We are also turning around the financial services business,” Shankar Raman said.

At the end of March, L&T’s standalone net worth stood at Rs 71,528 crore while the sum of the secured and unsecured debt was Rs 18,1500 crore.

L&T had attempted a buyback in 2019 but the capital markets regulator had disallowed it on the grounds that the company’s leverage would be more than twice the paid up capital and free reserves, if there was full acceptance of the offer.

At that time, L&T had proposed to spend a maximum of Rs 9,000 crore to buy back 61 million shares at Rs 1,475 apiece.

“After the experience we worked with Sebi to make the guidelines clearer. Now, as long as the leverage of the financial services business is under 6:1, the debt of the finance companies is excluded. The bulk of our debt is in the financial services business,” Shankar Raman said.

L&T is using the tender route through the stock exchange mechanism to carry out the buyback. As of now foreign portfolio investors hold 25% of L&T’s equity capital, financial institutions hold 13.62% while mutual funds hold 17.2%.