The Securities and Exchange Board of India has rejected the Larsen & Toubro’s proposed share buyback worth Rs. 9000 crores, citing a steep increase in the debt to equity ratio.
L&T in its regulatory filings said, “the Company had proposed a buyback of up to 6,10,16,949 equity shares from its equity shareholders as on the record date, being October 15, 2018, on a proportionate basis by way of the tender offer route through the stock exchange mechanism at a price of Rs. 1,475 per equity share, aggregating up to Rs. 9,000 crore.”
Larsen & Toubro had submitted a draft letter of offer (DLOF) to the market regulator for the proposed share buyback. By way of a letter dated January 18, 2019, SEBI stated, “Since the ratio of the aggregate of secured and unsecured debts owed by the Company after buy-back (assuming full acceptance) would be more than twice the paid-up capital and free reserves of the Company based on consolidated financial statements of the Company.”
SEBI added, “the buyback offer is not in compliance with Section 68(2)(d) of companies Act, 2013 and Regulation 4(ii) of SEBI (Buy-back Securities) Regulations, 2018. You are therefore advised not to proceed with this buy back offer.”