Last updated: Sep 18, 2023 1:34 PM IST
L&T launches a massive buyback offer of Rs 10,000 crore
Shares of Larsen & Toubro Ltd (L&T) traded higher on Monday as the share buyback begins today
Shares of Larsen & Toubro Ltd (L&T) were trading higher on Monday as the share buyback began today. The eligible shareholders can participate by offering shares during the normal trading hours of the secondary market of BSE and NSE. The share buyback issue will be completed on Monday, September 25.
Against a book size of up to 3,12,50,000 shares, L&T has received bids for 71 shares so far. BSE is the designated stock exchange for the buyback. L&T had recently increased the buyback price to Rs 32.00 from Rs 3,000 earlier, leaving the total buyback value unchanged at Rs 10,000 crore. Analysts noted that one of the key objectives of the company’s strategic plan, Lakshya ’26, is to improve return on equity (ROE). Return on equity for shareholders in the form of share buybacks is a step in that direction, Prabhudas Lilladher said in a recent note.
“L&T increased the buyback price by 6.7 percent to Rs3,200/share, reducing the number of shares to be bought back to 31.25 million (2.22 percent). We expect the buyback to add 125 basis points to ROE, versus 12 percent in FY23. L&T has charted its path to an 18 per cent return on equity by FY26, evenly sharing the core E&C improvement and reducing losses on PPP assets such as Hyd. Metro (read Playing on megatrends) and capital returns (read Capital returns to drive revaluation),” CLSA said on September 13.
The engineering and construction major said the acquisition window will be available on both BSE and NSE to facilitate placing of sell orders by the eligible shareholders, who wish to tender shares in the buyback.
“Eligible Shareholders may only place orders during normal trading hours on the secondary market through their respective stock broker(s) (together with the full set of documents for verification procedures) by providing the details of the shares they intend to purchase . tender under the buyback,” L&T said.
Should you tender your shares?
Market expert Ambareesh Baliga believes that retail shareholders should tender their shares in the buyback.
“The buyback represents L&T’s commitment to returning capital to its investors. With robust cash flow over the years, this move will also help reduce the company’s debt, thereby increasing financial flexibility. In essence, L&T’s buyback is a strategic move that benefits both the company and its shareholders, and underlines management’s confidence in long-term growth,” said Sonam Srivastava of Wright Research PMS.
Khadija Mantri, Associate VP – Research, Sharekhan at BNP Paribas, said, “We encourage investors to tender their shares in the L&T buyback as the buyback price of Rs. 3,200 per share is a premium of almost 9 to 10 percent over the current market price. While the underwriting ratio and allocation are likely to be low as the company would be buying back just 2.2 percent of its total equity, which amounts to 3,125 crore shares, this is the first-ever buyback by the engineering conglomerate, and hence investor interest is high . probably high for the same thing.”
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