Shares of Larsen & Toubro (L&T) hit a new high of Rs 2,787.65, up 2 per cent on the BSE in Thursday’s intraday trade, ahead of the record date for buyback. This comes after reports that the Indian infrastructure player was likely to bag an order worth $2.9 billion (around Rs 24,000 crore) from Saudi Aramco’s Jafurah unconventional onshore gas development project.
Saudi Aramco has planned a $110 billion Jafurah gas project in the eastern province. A CNBC-TV18 report said that L&T is the preferred contractor for a $2.9 billion contract.
The company classifies projects worth Rs 1,000 to 2,500 crore as significant orders, while those in the range of Rs 2,500 to 5,000 crore as classified as “large”.
According to the report, L&T will develop a gas processing plant and main process units for the project. However, the company is yet to respond to queries from CNBC-TV18.
Besides, L&T also submitted bids for another package of orders worth $10 billion for Saudi Aramco Safaniyah Gas Field recently.
L&T Buyback
The company has fixed September 12, 2023, as the record date for the purpose of determining the entitlement and the names of equity shareholders who would be eligible to participate in the buyback.
The Board of L&T, at its meeting held on July 25, 2023, had approved the buyback of 33.33 million equity shares at a maximum price of up to Rs 3,000 for an aggregate consideration of up to Rs 10,000 crore on a proportionate basis, through the tender offer route.
In financial year 2021·2022, the L&T formulated its Lakshya’26 Strategic Plan, one of the key strategic objectives of which was to improve return on equity and maximize shareholder value.
Increased profitability, release of working capital higher dividends apart, return of extra capital to shareholders in the form of buyback of shares of the company is one such initiative which can help in meeting these objectives, L&T had said as the objective of the buyback.
The company is currently following an asset-light business model, and hence a significant investment, which may utilise 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.
Since the announcement of buyback plan on July 20, L&T has outperformed the market by surging 12 per cent from a level of Rs 2,489.60. In comparison, the S&P BSE Sensex has slipped 2.5 per cent during the same period. L&T had also paid total dividend of Rs 30 per share, including a special dividend of Rs 6 per share, for the financial year 2023-24 in August.
The stock has given a return of 20 percent in three months, 45 percent in one year and 200 percent in three years.
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