A security guard stands outside a project office at a construction site for the Lucknow Metro developed by Lucknow Metro Rail Corp. and operated by Larsen & Toubro Ltd. in the Hazratganj area of Lucknow, Uttar Pradesh, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

L&T Approves Rs 9,000-Crore Share Buyback

Larsen & Toubro Ltd. will buy back as much as Rs 9,000 crore worth of its shares, in a first for the country's largest construction and engineering company.

The company will repurchase 6 crore shares (or 4.3 percent of equity) at Rs 1,500 apiece, according to its stock exchange notification today. The price is higher than the stock's all-time high of Rs 1,470 it clocked on Feb. 1.

“The share buyback is a positive move by the company since they were able to unlock money from its subsidiaries,” G Chokkalingam, founder and managing director at Equinomics Research & Advisory, told BloombergQuint in an interaction.

The company still has the potential of unlocking more money from its units like L&T Infotech and L&T Technology Services.
G Chokkalingam, Founder and MD, Equinomics Research & Advisory

He expects the stock to ‘Outperform’ in the short-to-medium term.

Brokerages CLSA and Macquarie had estimated that the company would buyback between Rs 4,500 crore and Rs 7,000 crore worth of shares.

L&T’s secured and unsecured loans stood at nearly Rs 73,000 crore as on March 2018, according to its exchange filings. Its current investments, and cash and bank balance stand at Rs 16,200 crore as on June 2018, while the net current assets stand at Rs 19,200 crore.

Buyback offers have become a popular route for Indian companies flush with cash to reward shareholders. Indian technology companies like Tata Consultancy Services Ltd., Infosys, Wipro and HCL Technologies Ltd. have carried out share buybacks recently.

 L&T Approves Rs 9,000-Crore Share Buyback

Shares of L&T rose as much as 1.9 percent to Rs 1,348, the highest levels since June 14. The stock has returned 6.8 percent so far this year, compared with an 11 percent jump in the S&P BSE Sensex Index.