Engineering and construction major Larsen and Toubro (L&T ) will buy back as much as Rs 10,000 crore worth of shares, its first-ever return of capital to shareholders.
The company’s board has approved the proposal to buy back 3.33 crore shares, representing 2.4 percent of the total paid-up equity share capital, at a maximum price of Rs 3,000 apiece, the company said in a statement.
The offer represents a premium of more than 17 percent to the July 25 closing price of Rs 2,561.95 . The buyback is subject to shareholders’ approval.
The buyback is subject to approval from the Securities Exchange Board of India (Sebi). This is L&T's second attempt after its earlier board-approved buyback for around Rs 9,000 crore was denied by Sebi in 2019, citing non-compliance with regulations.
"Since the ratio of the aggregate of secured and unsecured debts owned by the company after buyback (assuming full acceptance) would be more than twice the paid-up capital and free reserves of the company based on consolidated financial statements..., the buyback offer is not in compliance with Section 68(2)(d) of Companies Act, 2013 and Regulation 4(ii) of Sebi (Buy-back Securities) Regulations, 2018,” the regulator had said.
Since then, Sebi has amended its buyback norms for companies that have non-bank financial companies (NBFCs) or housing finance companies as their subsidiaries.
As part of Sebi's amendments, companies like L&T would be eligible for buyback if the aggregate of secured and unsecured debts owed by it to the paid-up capital and free reserves after buyback is less than 2:1 on both standalone and consolidated basis, excluding the kind of subsidiaries it mentioned.
However, the excluded subsidiaries must have a debt-to-equity ratio not exceeding 5:1 on a standalone basis for the parent company to proceed with the buyback.
As of March 2023, the debt-to-equity ratio for L&T and L&T Finance Holdings stood at 1.16 and 3.84. The post-buyback ratios can be assessed against Sebi's permissable limits once the repurchase size is known.
L&T's cash-on-books stood at Rs 58,093 crore as on March 31, 2023.
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