In a historic move, Larsen & Toubro, the renowned engineering and infrastructure conglomerate, has announced its intention to seek approvals from shareholders for a share buyback and a special dividend for FY2024. This marks the first time in the company’s 85-year history that it will initiate a share buyback program.
The decision was made public following a board meeting scheduled for July 25, during which L&T’s board will seek the necessary approvals for the proposed buyback and special dividend. The company further revealed that if approved, the record date for the dividend distribution would be fixed on August 2. However, specific details about the number of shares to be repurchased and the total amount earmarked for the buyback were not disclosed in the regulatory update.
It’s important to note that this is not the first time L&T has attempted a share buyback. Back in August 2018, the company’s board had approved a buyback plan amounting to around Rs 9,000 crore, equivalent to 4.29% of its paid-up equity capital. Unfortunately, the proposal faced rejection from the Securities and Exchange Board of India due to compliance issues and concerns over the increase in debt on L&T’s balance sheet after the buyback. Consequently, the plans were eventually shelved.
Despite previous setbacks, L&T remains financially robust, as demonstrated by its FY23 consolidated net profit of Rs 12,531 crore, representing an impressive 20.3% rise compared to FY22.
In December 2022, L&T initiated its ‘Lakshya 2026’ roadmap by divesting a 51% stake in Infrastructure Development Projects. As part of its plans for FY24, the company also signalled the possibility of making “certain exits.” Additionally, L&T has allocated Rs 5,000 crore for capital expenditures in FY24, which includes investments in a data centre and an electrolyser plant.
In a separate development, L&T’s board also approved the merger of its wholly-owned subsidiary, L&T Innovation Campus Chennai Ltd. (LTICC), with L&T Seawoods Ltd (LTSL). The merger, subject to regulatory approvals, would result in LTICCL no longer being a subsidiary of L&T. LTICCL, which currently holds an equity share capital of Rs 7 crore with no revenue, operates three wholly-owned subsidiaries that have yet to commence commercial operations. Following the merger, LTICCL and its subsidiaries will become wholly-owned subsidiaries of LTSL, which currently boasts a net worth of Rs 2,500 crore.
With a clear commitment to enhancing shareholder value and continued strategic developments, L&T’s recent initiatives are being closely monitored by investors and industry experts. The proposed share buyback and special dividend have the potential to further strengthen the company’s position in the market and secure its growth trajectory in the years to come. Shareholders eagerly await the outcome of the upcoming board meeting and the subsequent developments that will shape L&T’s path moving forward.
