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MUMBAI: Larsen Toubro’s decision to buy back Rs 9,000-crore worth of stock from shareholders reflects the engineering behemoth’s strategy to be assetlight and execute projects that do not require significant cash expenses.
“We will have capex but the jobs we have on hand don’t require the kind of cash reserves we have; so, we have decided to honour our commitment to improve shareholder returns,” SN Subrahmanyan, LT’s chief executive officer, told reporters after the company’s 73rd Annual General Meet on Thursday.
“We have a robust order book and have decided to remain asset-light.”
The AGM coincided with the decision of the company’s board to buy back sixty million outstanding shares, representing 4.29% of the equity, at a maximum price of Rs 1,500 a share.
Some equity market experts also see the company’s first ever buy-back as a safeguard against any possible attempts at hostile takeovers.
“Our share price is made up of how we perform and if we continue to perform well, the price of the share is the fortress against any outside factors,” said Subrahmanyan.
The company had Rs 8,700 crore in standalone cash and cash equivalents, and Rs 17,500 crore on a consolidated basis as of end-March.
LT has faced, resisted, and succeeded in retaining its ownership twice in the past when the undivided Reliance Industries and later Grasim made attempts to take over the company.
LT has no promoter; Life Insurance Corporation is its biggest shareholder.
LIC, Specified Undertaking of the Unit Trust of India and LT Employees Welfare Foundation together own little less than 35% in the company, ring fencing against any such activity.
“Even though awarding of infrastructure projects continued to be unpredictable in terms of the timelines, we registered significant growth,” AM Naik, group chairman told shareholders in his first AGM in a non-executive role.
Naik was criticised by former employee and shareholder Uday Dikshit for wrongfully diverting land in Powai to commercial residential projects.
The mood at the AGM became tense when some other former employees joined in and started shouting.
Another shareholder complained that while employees like him were asked to opt for Voluntary Retirement Scheme at the age of 50, why was Naik, now 75, still at the helm of the company.
While former employees have in the past raised issues at AGMs, in a first, some shareholders demanded an answer to the questions raised by the former employees.
Naik refused to answer, and told security guards, “
koi bhi awaaz kare toh baahar nikalo” (Anyone who makes noise should be taken out).
Subrahmanyan pacified shareholders by telling them that due process was followed in every decision taken by the company.
