L&T hits over two-month high; stock up 11% in two weeks

Shares of Larsen & Toubro (L&T) hit an over two-month high of Rs 1,374 per share, up 2%, gaining 11% in the past two weeks after the company announced a share buyback proposal. In comparison, the S&P BSE Sensex was up 2% during the same period. The stock was trading at its highest level since June 4, 2018, on the BSE.

Engineering conglomerate L&T’s board on August 24 approved the company’s first buyback in its 80 years, for up to 4.29% of its paid-up equity capital, aggregating to a value of about Rs 90 billion.

The company approved a proposal to buy back up to 60 million equity shares at a maximum price of Rs 1,500 per equity share for an amount of Rs 90 billion, L&T said in its statement to exchanges. This is the first ever buyback plan from L&T and would be subject to shareholder approval by means of a special resolution through a postal ballot.

The brokerage firm Motilal Oswal Securities consider L&T’s buyback program to be positive for the company and reiterate its commitment towards its five-year plan ‘Lakshya’ under which it intends to improve its RoE to 18% by FY21.

“The buyback will also re-emphasize management’s commitment on no large capex plans over the next few years, apart from Hyderabad Metro, divestment of non-core assets, and tight control over NWC and resultant improved cash generation,” the brokerage firm said with maintains ‘buy’ rating on the stock with target price of Rs 1,570.

Meanwhile, L&T has bagged fresh contracts of Rs 87.02 billion during the month of August. In the past two months, the company won orders worth Rs 157 billion, the exchange data shows.