Larsen & Toubro Stock Hits New 52-Week High Ahead Of Rs 10,000 Crore Buyback Shares Record Date; Key Pointers

Infrastructure giant Larsen & Toubro has witnessed stellar buying ahead of the record date for its Rs 10,000 crore worth buyback of shares. On September 8, L&T stock hit a new 52-week high of Rs 2,927.95 apiece on BSE, while ending the trading week with over 6% upside. Year-to-date, L&T shares have rallied by nearly 39% on the exchange.

On BSE, after hitting the new 52-week high of Rs 2,927.95 apiece, L&T shares ended at Rs 2902 per share, soaring by Rs 54.95 or 1.93%. L&T's market cap is at Rs 4,07,919.26 crore.

As per the regulatory filing, L&T fixed September 12, 2023 as the Record Date for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

The company has proposed the buyback of more than 3.33 crore equity shares fully paid-up equity shares having a face value of Rs 2 each. The buyback price is set at Rs 3,000 per share on a proportionate basis through tender offer route through stock exchange mechanism.

Overall, the buyback should not exceed Rs 10,000 crore.

L&T stated that all of the equity shareholders of the company as on Record Date will be eligible to participate in the Buyback, including holders of global depositary shares ("GDSs") of the Company, who cancel any of their GDSs and withdraw the underlying Equity Shares prior to the Record Date, such that they become equity shareholders of the Company as on the Record Date.

The objective of the buyback is to improve return on equity and maximize shareholder value. Also, the company plans to meet objectives like increased profitability, release of working capital, higher dividends apart, return of extra capital to shareholders in the form of buyback of shares.

Currently, the company is following an asset-light business model and hence signifiaint investments which may utilize surplus cash is not envisaged. Hence, it is proposed to undertake a buyback to increase shareholder value in the longer term and improve return on equity.

Companies like JM Financial and Axis Capital are the managers of the buyback, while KFin Technologies is the registrar.

Buy-Back is a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than market price. When it buys back, the number of shares outstanding in the market reduces.

As per BSE FAQS, a buyback allows companies to invest in themselves. By reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns. Buybacks can be carried out in two ways:

Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them.

Companies buy back shares on the open market over an extended period of time.

Some of the key reasons for buyback are --- to improve earnings per share; improve return on capital, return on net worth and to enhance the long-term shareholder value; provide an additional exit route to shareholders when shares are undervalued or are thinly traded; provide an additional exit route to shareholders when shares are undervalued or are thinly traded; enhance consolidation of stake in the company; prevent unwelcome takeover bids; return surplus cash to shareholders; achieve optimum capital structure; support share price during periods of sluggish market conditions; and service the equity more efficiently, as per BSE FAQs.