Engineering and Infrastructure conglomerate Larsen & Toubro (L&T) has launched its Rs 10,000 crore share buyback. Starting from today until September 25, investors have the option to tender their shares in the buyback. The buyback will be carried out through the tender offer route, where shareholders have to submit their shares at a specified price.
L&T will be repurchasing the shares at a revised price of Rs 3,200. This increase came after the stock price rose by 15 percent since the initial buyback announcement. The company has also allocated 15 percent of the buyback shares for small shareholders. Small shareholders are defined as those holding not more than 67 equity shares as of the record date. According to L&T, there are 10,80,853 small shareholders, accounting for 63.25 percent of the total shares to be purchased in the buyback.
For small shareholders, the entitlement ratio has been set at nine equity shares for every 38 held on the record date. For general shareholders, the ratio is 11 out of every 574 shares held on the record date. However, shareholders who own four shares or less will receive a zero entitlement tender form, meaning they are technically not eligible to participate in the buyback. Despite this, L&T mentioned that such shareholders may still tender additional shares, and preference will be given to them in the acceptance of one equity share.
By repurchasing the shares, L&T expects its Earnings per Share (EPS) to increase from 55.85 to 57.12. Reducing the number of outstanding shares will lead to an automatic increase in EPS. The debt-to-equity ratio will rise to 0.3x, while net worth will decrease to Rs 61,527 crore.
Market experts suggest that retail shareholders should participate in the buyback. The buyback demonstrates L&T’s commitment to returning capital to investors and will aid in reducing the company’s debt. It is seen as a strategic move benefiting both the company and shareholders, highlighting management’s confidence in long-term growth.
– L&T buyback offer document
– Ambareesh Baliga, market expert
– Sonam Srivastava, Wright Research PMS analyst