L&T To Consider Share Buyback On Aug. 23

The board of Larsen & Toubro Ltd. will consider a buyback of equity shares at its meeting on Aug. 23.

India’s largest engineering and construction company, while informing exchanges in a filing, didn’t specify the amount or the price. The stock rose as much as 6.4 percent intra-day, the most in over two years, to Rs 1,319.95 apiece.

The announcement comes after software services providers Tata Consultancy Services Ltd. and HCL Technologies Ltd. announced their buyback plans to reward investors. TCS, at its board meeting in June, had announced that it will repurchase 7.6 crore shares (1.99 percent of the total paid-up equity) at Rs 2,100 per share for about Rs 16,000 crore. HCL Technologies had also announced a buyback plan worth up to Rs 4,000 crore at Rs 1,100 per share last month.

Here’s what analysts had to say about L&T’s buyback plans:

CLSA

• L&T fulfilling its guidance of going asset light.
• Estimate Rs 4,500-crore worth buyback.
• Buyback to support return on equity; may add up to 85 basis points.
• May not be the last buyback as cash on books at $2.1 billion.
• Maintained ‘Buy’ with a price target of Rs 1,730.

Macquarie

• L&T can potentially launch a buyback of up to $1 billion or Rs 7,000 crore.
• Buyback decision is based on very low leverage, positive cash flows and large inflows from the electrical and automation transaction.
• The decision to consider buyback will drive short-term price. It gives confidence in terms of the outlook.
• Maintained ‘Outperform’ with a price target of Rs 1,825.

Dimensions Corporate Finance Services (Ajay Srivastava)

• The stock has been a poor performer despite being in a high growth segment.
• Should use cash on books to invest in projects and subsidiaries instead of share buyback.
• Appeal to independent directors to cancel the plans.