L&T To Decide On Buyback Rejection After Announcing Q3 Earnings On Friday

Larsen & Toubro Ltd. will decide its course of action on the market regulator’s surprise rejection of its share buyback programme after the construction and capital goods firm reports its December quarter earnings on Friday.

L&T had proposed to buyback 6.1 crore shares at Rs 1,475 apiece comprising 18.72 percent of the company’s net worth and filed an application with the Securities and Exchange Board of India on Oct. 10, last year. The regulator, however, turned down the buyback proposal, estimated at Rs 9,000 crore, on the ground that its debt-to-equity ratio would rise sharply if it went through.

The SEBI rule states that pre- and post- buyback, the company’s debt-to-equity ratio should not go beyond 2:1, SN Subrahmanyan, managing director and chief executive officer of the company, told BloombergQuint in an interaction, adding that the rule applies to the company that files for the buyback. The company will also conduct a board meeting on Friday, he said.

The SEBI, he said, was considering debt levels of the entire L&T group, comprising entities like L&T Infotech, L&T Realty and L&T Finance. He said this was due to a SEBI rule specifying that the regulator would examine the company on a consolidated basis. “The debt on L&T standalone booked is hardly Rs 10,500 crore for the scale of operations that we have, which is 0.17 and after the buyback it would have gone to [around] 0.21.”

“When you consolidate us with non-banking financial services company L&T Finance, our debt-equity goes above 2:1 because L&T Finance got Rs 80,000-odd crore of debt, and [its] net worth is about Rs 54,000 odd crore,” Subrahmanyan said. “We were not purview to this in general rule.”

Other Highlights:

• Return on equity would continue to grow on L&T’s performance and sale of non-core assets.
• Company will study ways to return funds to shareholders.

Watch the full interview here: