L&T buyback: The share buyback of engineering and infrastructure conglomerate Larsen & Toubro (L&T) opens today. Investors can tender their L&T shares in the ₹10,000 crore worth L&T share buyback till September 25.
L&T had earlier announced that the buyback will be done via the tender offer route, wherein the shareholders will tender shares at a particular price.
The floor price for the share repurchase has been fixed at ₹3,200 apiece, which is over 9% higher than Friday’s closing price.
L&T has increased the share buyback price from ₹3,000 earlier factoring in market sentiment after a strong 15% rally in L&T shares since the announcement of the share buyback.
“One of the key objectives of the company’s Strategic Plan, Lakshya ’26, is to enhance the return on equity (ROE). Return on equity capital to shareholders in the form of Buyback of shares of the Company is a step in that direction,” said Amit Anwani – Research Analyst, Prabhudas Lilladher.
Also Read: L&T buyback opens: Date, ratio, price, other details in five points
The board of directors of the company has fixed buyback ratio at 9:38 for small shareholders whereas Larsen & Tourbo buyback ratio for the general category of all kinds of shareholders has been fixed at 11:574.
In this Larsen & Tourbo buyback offer, the engineering behemoth aims to buy 31,250,000 shares through a tender route, representing 2.4% of the total equity, which amounts up to ₹10,000 crore.
Should you tender shares in L&T buyback?
L&T share price has rallied nearly 40% in calendar year 2023 so far, while the stock is up more than 51% in the last one year period.
Predicting the exact acceptance ratio for L&T buyback offer with certainty is a difficult task due to various influential factors, notably the market price of L&T shares when the buyback commences.
“An assessment in light of prevailing market sentiment and L&T’s robust growth prospects suggests that shareholder participation may not be as extensive. Additionally, it’s worth noting that the premium offered by the company is not so enticing, potentially resulting in an estimated acceptance ratio of approximately 35-40%,” said Sugandha Sachdeva, Executive Director & Chief Strategist at Acme Investment Advisors.
This anticipated acceptance ratio is closely tied to individual shareholder decisions, which can vary widely.
“Some investors may opt to take part in the buyback, while others might choose to retain their L&T shares. These decisions are influenced by diverse factors including personal financial needs, specific investment objectives, and individual risk tolerance levels,” Sachdeva added.
Avinash Gorakshakar, Head Research at Profitmart Securities is of the view that retail shareholders can tender their shares in the L&T buyback.
“The L&T share buyback gives a good arbitrage opportunity to retail investors. After the buyback, L&T share price may fall, but the long-term prospects of the company remain strong. Shareholders looking to make a fast buck can tender their shares in the L&T buyback,” Gorakshakar said.
L&T shares hit a 52-week high of ₹3,008.00 apiece on September 12, 2023, and a 52-week low of ₹1,798.00 on September 29, 2022.
At 10:00 am, L&T share price was trading 0.52% higher at ₹2,926.00 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 18 Sep 2023, 10:01 AM IST