In its first share buyback, Larsen & Toubro to shell out Rs 9,000 crore

MUMBAI: In its first share repurchase programme, Larsen & Toubro (L&T), the country’s largest construction and engineering company, will buy back as much as Rs 9,000 crore of its own stock. L&T will repurchase six crore shares, representing 4.2 per cent of its equity capital, at Rs 1,500 apiece.

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The buyback price is at an 11 per cent premium to L&T’s Wednesday closing price of Rs 1,352 on the BSE.

Companies flush with cash opt for share buybacks if they don’t have any specific investment or other deployment requirements. L&T had cash, bank balances and investments of Rs 16,858 crore as on March 31, 2018.

“L&T has been publicly listed since 1951 and we were looking for an opportunity to give back to our shareholders. With so much cash lying with the company and all the capacity build-up being done for our future requirements, this is the right time to reward shareholders,” company chairman A M Naik told ET Now.

L&T will buy back stock from existing shareholders on a proportionate basis. This means that all categories of shareholders can participate in the share repurchase programme. Financial institutions, including SUUTI, hold the largest block of 23 per cent in L&T, followed by public shareholders with 22 per cent.

The balance 55 per cent is held by other shareholders, including the L&T Employees Welfare Foundation. However, it will be interesting to see whether the foundation, which holds 12 per cent in the company, decides to participate in the share repurchase programme. The foundation, which was set up to prevent L&T being taken over by the Aditya Birla Group in 2003, has been acting as a fence against any unwarranted acquisitions.

Naik in the past had told TOI that the structure ensures that it won’t be easy to buy the foundation’s large chunk of stake. If the foundation doesn’t participate in the share repurchase programme, it will tighten its grip over the $18-billion enterprise which has operations in over 30 countries.

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Besides the foundation, L&T’s directors hold 15.43 lakh shares of the company. As on March 31, 2018, Naik held 4.24 lakh shares of L&T.

Some of the shareholders expressed displeasure over L&T’s share repurchase programme. At the company’s annual general meeting on Thursday, they said that they don’t want to give up their shares and that the company should instead go for a rights issue. “I want to keep the shares for my future generation as I got them from my parents,” said a shareholder.