L&T’s Rs 10,000 cr share buyback commences on September 18, to close on September 25

L&T’s Rs 10,000 cr share buyback commences on September 18, to close on September 25

Larsen & Toubro Ltd (L&T), a prominent player in the engineering and infrastructure sector, is gearing up to commence its equity share buyback program on September 18, 2023. This buyback initiative presents an opportunity for shareholders to participate in the program, provided they submit their shares within the stipulated timeframe.

The closing date for this share buyback program has been set for September 25, 2023. During this period, shareholders can tender their shares as part of the buyback, allowing them to potentially benefit from this strategic financial move by L&T.

The buyback program, initially announced at a price of Rs 3,000 per share, was later increased to Rs 3,200 per equity share, highlighting L&T’s commitment to enhancing shareholder value and optimizing its capital structure. Shareholders considering participation in the buyback will have this revised buyback price to factor into their decisions, providing an attractive opportunity to engage with L&T’s value-enhancing strategy.

L&T had initially announced its intention to undertake a share buyback program worth Rs 10,000 crore concurrently with the release of its June quarter results in July. The tender offer buyback was initially set at a price of Rs 3,000 per share. However, in a subsequent announcement made on September 11, the company revealed its decision to increase the buyback price to Rs 3,200 per equity share.

This adjustment in the buyback price reflects the company’s commitment to enhancing shareholder value and returning surplus capital to its investors. The revised buyback price demonstrates L&T’s confidence in its financial strength and outlook, and it serves as an attractive opportunity for shareholders looking to participate in the buyback program.

R. Shankar Raman, Chief Financial Officer (CFO) and whole-time director of Larsen & Toubro (L&T), has emphasized the company’s strong commitment to improving its Return on Equity (RoE). This commitment aligns closely with the core objective of L&T’s five-year strategic plan, ‘Lakshya 2026.’ The strategic plan is geared towards enhancing shareholder value by optimizing RoE. The decision to conduct a buyback of L&T shares at a revised price of Rs 3,200 per share underlines the company’s dedication to achieving this objective.

Foreign brokerage firm CLSA highlighted that L&T’s actions are consistent with its RoE-focused approach. The increased buyback price is seen as evidence of L&T’s commitment to delivering value to its shareholders. By repurchasing shares at an attractive price, the company is returning capital to its investors and effectively deploying surplus funds to maximize shareholder returns. This strategy is in line with L&T’s broader efforts to boost its financial performance and create value for its shareholders.

Larsen & Toubro (L&T), a major player in the Engineering, Procurement, and Construction (EPC) sector, expects that the share buyback program will have a limited impact on its profitability and earnings. The primary consequence of the buyback will be a reduction in the funds available for investment, which could have otherwise been utilized to generate investment income for the company.

It’s worth noting that under the buyback regulations, a promoter can choose to participate in a buyback. However, in the case of L&T, the company is known for its professional management structure and does not have identifiable promoters or a promoter group in control. As a result, the disclosure of promoter intentions, current holdings as of the Public Announcement date, and trading details for the past 12 months is not applicable or relevant to the company’s situation.

This buyback program represents a strategic financial move for L&T aimed at optimizing its capital structure and delivering value to its shareholders. While it will reduce the funds available for investment, the company believes that the overall impact on its financial performance will be minimal, underscoring its confidence in its financial strength and prospects.

The financing for Larsen & Toubro’s (L&T) planned share buyback will be sourced from multiple channels, including the company’s free reserves, which encompass retained earnings. Additionally, funds will be drawn from the company’s existing cash and cash equivalents, as well as its internal earnings. The company will adhere to the Buyback Regulations and the relevant legal provisions to ensure that the financing is obtained from permissible sources.

Larsen & Toubro (L&T) stands as a prestigious and exceptionally well-managed conglomerate with a substantial market value of approximately $23 billion. The company’s roots trace back to its establishment in Mumbai in 1946, founded by Danish engineers Henning Holck-Larsen and Soren Kristian Toubro. Over the years, L&T has grown to become a prominent and diversified player across a wide spectrum of sectors, encompassing Engineering, Procurement, and Construction (EPC) projects, high-tech manufacturing, and a range of services.

L&T has cemented its position as a stalwart in India’s corporate landscape, symbolizing excellence, innovation, and reliability. Its shares have been publicly traded on the Bombay Stock Exchange (BSE) since September 24, 1952, and on the National Stock Exchange (NSE) since December 14, 2000. The company’s extensive history, coupled with its diverse portfolio, exemplifies its role as a leading and esteemed contributor to India’s industrial and economic progress.