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NEW DELHI: The board of construction major LT on Thursday approved first-ever share buyback.
The board okayed buyback of shares worth Rs 9,000 crore, which will mean acquisition of 4.29 per cent of the equity.
The board cleared buyback of up to 6 crore shares at a maximum price of Rs 1,500 per share, said an ETNow report.
At this buyback price, the company is offering a 13 per cent premium to Tuesday's closing price of Rs 1,322.15 apiece.
At the time of writing this report, the stock traded 1.63 per cent higher at Rs 1,343.75 apiece on BSE.
AM Naik, Group Executive Chairman said, "This is the right time to reward our shareholders." He justified the buyback as doable, given the cash in hand, adding that the company has plans for the next five years.
According to an ET report dated August 21, analysts expect a few more buyback rounds from the country’s largest infrastructure company given the ample cash on its books due to recent sale of assets and its intention to improve the return on equity (RoE).
The company raised nearly Rs 4,500 crore over the past eight quarters by divesting assets including IPO proceeds from LT Infotech and LT Technology Services, sale of the general insurance unit and the Kottupalli port.
Its cash and equivalents rose to Rs 6,824 crore in FY18 compared with Rs 3,526 crore in the previous fiscal.
"In the five-year vision plan, the company has stated to pursue a light-asset approach.
Given a few more assets such as Nabha Power Plant, InViTS for toll roads and stake sale in Hyderabad Metro on the block, analysts expect more buyback offers from the company in the coming quarters.
These assets together are worth over $2 billion (approximately Rs 14,000 crore)," the report added.
Global brokerages are bullish on the the company's buyback plan.
CLSA said the buyback will support return on equity (RoE) of the company.
“It may not be the last buyback as cash on books stand at $2.1 billion.
We maintain ‘buy’ on LT with a target price of Rs 1,730, ” CLSA added.
Macquarie retained ‘outperform’ view on LT with a target price of Rs 1,825.
“Buyback sends willingness to return capital", Macquarie said.
Quantum of buyback will hold the key, the foreign brokerage added, which expects cash flows to remain comfortable in FY19.
The engineering and construction conglomerate last week informed bourses that the board will consider the proposal for buyback of shares on Thursday.
