The Board of Larsen & Toubro, (L&T) on Thursday approved a proposal to buy back Rs 9,000 crore worth shares, citing cash on hand and no capital expenditure in near future.
The proposal, first for the company and the segment, L&T plans to buy back six crore shares at a maximum price of Rs 1,500 apiece, which is over 13% premium to Tuesday's closing price of Rs 1,322.15.
The buyback is worth 4.29% of the paid-up equity capital.
Prior to the 73rd Annual General Meeting (AGM) on Thursday, the Board met and approved the buyback proposal.
Shareholders who spoke at the AGM exuded confidence in the company stating that they prefer holding on to the shares instead of accepting the buyback offer.
A couple of the shareholders said they won't go for the offer even if they are given double the amount.
Post-AGM, while interacting with the media on the buyback offer, S N Subramanyan, managing director and chief executive officer, L&T, said, "As far as our knowledge goes, this is the first time an infrastructure company has gone for a buyback."
Explaining the rationale behind the decision, Subramanyan said, "We have cash in hand, and as we look forward we do believe we will generate further cash from the backlog (of projects) we have and from the projects that are going on. We do have capital expenditure as we look into the future."
The buyback offer is part of the "further increase in return on equity", he said, adding that the company would continue to pay dividend.
"We have propositions for other businesses. We will continue to pay dividend but in spite of that we will continue to have surplus cash on hand," said Subramanyan, stressing on strong financial position of the engineering conglomerate.
Since the first news of buyback came out, the share price of L&T has been on a rise. On Thursday morning the company announced price of the buyback at Rs 1,500. During the day on Thursday, the share price rose 2.30%, or Rs 30.35, to close at Rs 1,352.
The buyback size is 4.29% of the paid-up equity capital of the company.
On recovery of dues from Bhushan Steel, Subramanyan said the matter is sub- judice, but L&T is an operational creditor. The judiciary has allowed their argument and there is a hope for recovery of around Rs 475 crore from Tata Steel, he said.
On Kerala flood relief, non-executive chairman A M Naik replied that the entire workforce of the organisation is contributing a day's salary. "The company will contribute three times that amount," he said. The donation is likely to be spilt between Kerala, Uttarakhand, Karnataka and Himachal Pradesh which have hit by heavy rainfall and floods.
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