L&T approves Rs 10,000 crore share buyback at Rs 3,000/share

Larsen and Toubro Ltd (L&T), a renowned construction and engineering company, announced its decision to conduct a buyback offer for the first time in its illustrious eight-decade history on Tuesday. The buyback plan aims to repurchase shares valued at up to Rs 10,000 crore from the company’s public shareholders. 

The company considering a buyback offer through a book-building process on the stock exchange, targeting a 2.4% stake, which corresponds to approximately 33.33 million shares held by public shareholders. It will offer up to Rs 3,000 per share, approximately a 17% premium to the previous day’s closing price of Rs 2,562, to shareholders willing to tender their shares in the buyback.  

Moreover, the company has declared a special dividend of Rs 6 per equity share, which amounts to 300% of the face value of Rs. 2 each, for the FY24. 

If approved by the Securities and Exchange Board of India, the buyback is expected to be primarily funded through the company’s reserves and surplus, as per a source closely associated with L&T’s top management. 

Now if check the reserves and surplus of the company then in FY23 company recorded a total of Rs 88,577.76 crore in reserves and surplus. During the same period, the group witnessed a 21% increase in profit, amounting to Rs 12,531 crore. 

Approximately five years ago, L&T had initially disclosed a share buyback plan for 4.29% of shares, totalling Rs 9,000 crore, at a price of Rs 1,475 per share. However, the plan faced disapproval from Sebi due to concerns about the potential impact on the company’s debts if the buyback were to proceed. 

If we examine the current ownership structure, FIIs (Foreign Institutional Investors) hold 25.29%, DIIs (Domestic Institutional Investors) hold 38.01%, and the Government holds a 0.23% stake in the company. The remaining portion of 36.47% is held by public investors. 

Let’s take a brief look at the results reported by the company for the June quarter. L&T’s revenue experienced a significant growth of 33.55%, reaching Rs 47,882 crore compared to Rs 35,853 crore during the same quarter last year. The company achieved an operating profit of Rs 6,316 crore, with a margin of 13%. Furthermore, the net profit of the company stood at Rs 3,096 crore. 

At the time of writing this article, the company’s shares are trading at 2662.75, showing a 3.93% increase from the previous day’s closing price of Rs 2561.95 on the BSE. The current market capitalisation of the company stands at Rs 3,74,290 crore. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet, and is subject to changes. Please consult an expert before making related decisions.