Larsen & Toubro gains 2% as board to consider special dividend on Wednesday

Larsen & Toubro
Shares of Larsen & Toubro (L&T) gained 2 per cent at Rs 957 on the BSE on Monday, after the engineering conglomerate said its board will consider special dividend on Wednesday. The stock was quoting higher for the seventh straight day, and has gained 8 per cent during the period.

“Given that at the meeting of the board of directors of the Company scheduled to be held on Wednesday, October 28, 2020, it is proposed to consider and approve special dividend on equity shares, for the Financial Year 2020-21,” L&T said in a exchange filing.

The record date for the purpose of determining the entitlement of the equity shareholders for the said dividend, if declared, has being fixed as Thursday, November 5, 2020, it said.

Earlier, on October 14, L&T informed the stock exchanges that a meeting of the board of directors of the Company will be held on Wednesday, 28th October to consider and approve the unaudited financial results of the Company for the quarter and half year ended 30th September 2020.

"The special dividend could be the long-awaited trigger for the stock; it addresses a key capital allocation issue as it effectively rules out large one-time equity infusion for Hyderabad Metro," wrote Priyankar Biswas tracking the company at Nomura in an October 25 co-aothored note with Neelotpal Sahu.

Order inflow

During July-September quarter (Q2FY21), L&T announced order inflows in the range of Rs 8,500-20,000 crore (ex-services segment) across construction, water effluent, heavy civil infrastructure and defence segments. ICICI Securities expect reasonable execution pick-up sequentially as workers are gradually returning across sites reaching around 80-90 per cent of pre Covid levels during the quarter.

In our view, working capital and cash flow situation will be key monitorables. Consequently, we expect adjusted standalone revenue (ex E&A as discontinued operations) to decline 19.5 per cent to Rs 15,102. Ebitda (earnings before interest, taxes, depreciation, and amortization) is expected to fall 22.2 per cent to Rs 1,208 crore with margin down 30 bps to 8.0 per cent and adjusted profit after tax expected to decline 50.7 per cent to Rs 978 crore, partly due to higher other income and tax adjustments in the base quarter, the brokerage firm said in result preview.

Despite of outperformance in past one week, L&T has underperformed the market by gaining 3 per cent in past three months, as compared to 7 per cent rise in the S&P BSE Sensex. In past one year, the stock has seen one-third of its value erosion, against 4 per cent gain in the benchmark index.

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