Larsen & Toubro's Rs 10,000 Crore Buyback Offer Opens; Should You Buy?

Construction giant, Larsen & Toubro (L&T) traded on a bullish note as its Rs 10,000 crore buyback offer opens on Monday. For the buyback, L&T raised its floor price to Rs 3,200 per share and slashed the offer size to 3.12 crore equity shares earlier. L&T stock gained by nearly a per cent on BSE.

At the time of writing, the stock traded at Rs 2,925.60 apiece, up by 0.51%. The stock was near its intraday high of Rs 2,929.70 apiece. Its market cap is more than Rs 4.11 lakh crore.

The buyback opened on September 18 and will be available till September 25. The last date and time for receipt of completed tender forms and other specific documents by the Registrar of the buyback is also scheduled for September 25, at 5 p.m.

Last week, L&T reduced its proposed maximum number of Equity Shares to be bought back by the company to over 3.12 crore equity shares representing 2.22% of the total paid-up equity shares. Earlier, the buyback size was to the tune of over 3.33 crore equity shares.

Further, L&T increased its buyback price to Rs 3,200 per share from earlier Rs 3,000 per share.

Under the buyback offer, the buyback entitlement for small shareholders is 9 Equity Shares for every 38 Equity Shares held on the record date. While the entitlement is 11 Equity Shares for every 574 Equity Shares held on the record date for other eligible shareholders.

Eligible shareholders can also check the entitlement on the website of the registrar of the buyback by following the steps mentioned below:

- Click on https://kosmic.kfintech.com/karisma/buybackofferv2.aspx

- Select the name of the Company - 'Larsen & Toubro Limited - Buyback 2023'

- Select holding type - "Physical" or "NSDL" or "CDSL"

- Based on the option selected above, enter your "Folio Number" or "NSDL DPID/Client ID" or "CDSL Client ID"

- Enter the Security code and click on Submit

- The entitlement will be provided in the pre-filled 'FORM OF ACCEPTANCE-CUM ACKNOWLEDGEMENT'

The record date was September 12, 2023, to determine the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

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

Should You BUY L&T shares?

In a research note dated September 13, Amit Anwani - Research Analyst, Prabhudas Lilladher said, 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 a Buyback of shares of the Company is a step in that direction.

"We revise our FY24/25E estimates by 1.7%/3.7%, post factoring in healthy growth prospects for hydrocarbon business. The stock is currently trading at a PE of 32.9x/27.1x FY24/25E. Maintain 'Buy' rating on the stock with revised SoTP-based TP of Rs3,302 (Rs2,955 earlier) valuing core business at PE of 25x FY25E (22x earlier), given recent large order wins aiding strong revenue visibility and improving Hyderabad Metro Performance," Anwani said.

Joshi added that L&T has been issued a letter of intent worth $3.9 billion from Saudi Aramco for phase-II expansion of its Jafurah unconventional gas production project which itself can meet ~13% of FY24 order inflow guidance. The company bagged orders worth Rs 655.2 billion in Q1FY24.

He said, "We believe, L&T to comfortably surpass its order inflows guidance of 10-12% growth for FY24 (~Rs2.3trn in FY23) aided by large international and domestic order wins. The company had revised its tender prospects in Q1FY24 to Rs10.07 trillion for 9MFY24 vs. Rs9.73trn guided for 12MFY24. The prospect revision was mainly in hydrocarbon business (Rs3.47 trillion guided in Q1FY24 vs Rs2.44 trillion in Q4FY23) mainly from the Middle East market."

Further, Joshi added, "We believe L&T is well-placed to benefit in the long run given 1) strong tender prospects, 2) better order conversion in domestic markets, 3) significant traction in hydrocarbon and 4) renewable energy orders from international markets like Saudi Arabia and expected uptick in domestic private capex."

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.