L&T Zooms 4% As Stock Trades Ex-Date For Buyback; Share Buyback Price Revised To Rs 3,200

Larsen & Toubro (L&T) shares rallied 4 per cent on the BSE to scale a fresh high of Rs 2,998 in Tuesday’s intra-day trade after the company revised its buyback price upwards from Rs 3,000 to Rs 3,200 per share.

At the same time, the maximum no of shares to be bought back has been reduced to about 31.2 million shares from about 33.3 million shares earlier. The revised buyback represents 2.22 per cent of the paid up equity share capital of the company.

L&T said one of the key objectives of the company’s strategic plan, Lakshya ’26, is to enhance the return on equity (ROE) and thereby maximise shareholder value. Return on equity capital to the shareholders in the form of buyback of shares of the company is a step in that direction, it said in a BSE filing.

Meanwhile, the stock of L&T turned ex-date for buyback today. The company fixed September 12, 2023 as the Record Date for the purpose of determining the entitlement and the names of equity shareholders who are eligible to participate in the buyback.

L&T has outperformed the market recently with the stock rallying 11 per cent in the past seven trading days. Thus far in the calendar year, it has soared 43 per cent, as compared to a 10 per cent rise in the S&P BSE Sensex.

ICICI Securities last week upgraded the stock to ‘BUY’ on strong consecutive order inflow for two quarters (Q1, Q2FY24), which it said could likely result in beat to order inflow guidance for FY24. The domestic brokerage talked about a significant buyback to reward shareholders and consequent improvement in RoE and expected expect margin improvement for core business amid benign raw material prices. “We upgrade the stock to BUY with SOTP based target of Rs 3,141 (assigning 30x FY25E to EPC business),” it said.

L&T was in news recently amid reports of a $3.9 billion order from Saudi Aramco. Foreign brokerage CLSA said the biggest opportunity for L&T in rest of FY24 is Middle East (ME) hydrocarbon, which should address market concerns of slowdown in government orders in Q4FY24 ahead of elections.

“ME is transitioning well using gas as a transition fuel before renewables take over the long-term with Aramco launching $100 billion gas field at Jafurah. L&T guided for a bigger prospective pipeline for 9MFY24 versus the start of the year at $125 billion up 34 per cent YoY for its core E&C business led by a spike in GCC capex. L&T with its long standing in MENA and competency, is a one of the few preferred contractors of Aramco,” CLSA said.

Orders, CLSA said, are likely to flow through with Aramco likely to order $10 billion worth orders for Jafurah, where L&T has emerged as a preferred bidder for orders worth $3.9 billion(17 per cent of FY24 inflows.

Till date in FY24, L&T has announced orders worth over Rs 75,000 crore. “With this significant accretion in orders, L&T could report over 20 per cent growth in order inflow in Q2 (excluding services), in our view,” ICICI Securities said.