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L&T stocks lose 3% before recovery on Sebi refusal for buyback (Lead)
Mumbai, Jan 21 (IANS) Shares of engineering and construction conglomerate Larsen and Toubro (L&T) fell on Monday by over 3 per cent in opening trade over market regulator Sebi’s denial of permission last week for the company’s Rs 9,000-crore share buyback offer.
The L&T stock, however, recovered during the day to close flat at Rs 1,314.20 a share, down 0.31 per cent, or by Rs 4.05, on its previous close on the BSE.
In a regulatory filing with the stock exchanges on Saturday, the company said the regulator Securities and Exchange Board of India (Sebi) has asked it not to go ahead with the buyback.
In a letter to L&T, the regulator said the buyback offer is not in compliance with Sebi rules as well as the Companies Act “since the ratio of the aggregate of secured and unsecured debts owed by the company after buyback (assuming full acceptance) would be more than twice the paid-up capital and free reserves of the company based on consolidated financial statements”.
L&T had proposed to buy back up to 6.1 crore shares from shareholders at a price of Rs 1,475 per share, aggregating to Rs 9,000 crore. The offer was open to those holding equity shares as on October 15.
Reacting to the development, analysts said that Sebi scrapping the buyback could impact the return on equity (ROE) estimates for the next fiscal.
“L&T had considered standalone FY18 financial statements. However, Sebi had considered consolidated financials – this difference in interpretation led to cancellation of buyback,” Japanese brokerage Nomura research report said on Monday.
“We estimate that the scrapping of the buyback could impact our RoE estimates by 150-165 bp over FY20F/21F. However, the impact may be limited to some extent in the case of a special dividend.
“Special dividend is an alternative since buyback option is effectively ruled out post Sebi ruling,” the report added.
Describing Sebi’s buyback refusal as a negative surprise,JP Morgan said: “Better than expected core P&L (profit and loss) performance in Q3 may assuage worries around execution.”
Reacting to the developments Goldman Sachs said it sees this as a potentially negative news flow for L&T as this was one of the steps to be taken by the company to reach its target ROE of 18 percent by FY21. Any potential buyback could have further helped L&T reach its ROE target. It expects the company to proceed with its plans to meet its ROE target, including the sale of its electrical and automation division.
While broakrage firm Macquarie said, “L&T can explore alternative methods to redistribute excess capital.”
Adding that it believes the regulator’s view to consolidate debt of L&T Financial Services is too conservative. Knee-jerk reaction possible, but it would create an opportunity to buy the stock. Company could reaffirm its stance of distributing excess capital to shareholders.
CLSA said that the regulator is mistaken in looking at consolidated financials, particularly when L&T has not guaranteed the debt of L&T Finance-47 per cent of consolidated debt.
“Given its focus on return-on-equity enhancement, it thinks L&T’s board could approve a one-time large dividend (about Rs 53 a share) this week. This would help L&T’s ROE to expand (120 basis points in FY20 versus current estimates,” added CLSA.
–IANS
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Dr. Abhishek Verma Dedicates a Shelter in Memory of His Mother, Veena Verma, at KGMU; Inaugurated by Daughter Nicolle Verma
World-renowned business tycoon Dr. Abhishek Verma has supported Foodman Vishal Singh’s Hunger-Free World mission. In memory of his mother, Late Veena Verma, who was a 3 term Rajya Sabha MP.
Dr. Verma dedicated a state-of-the-art free permanent shelter for the attendants of patients at KGMU Medical University, Lucknow, under the aegis of Vijay Shree Foundation. His daughter, Nicolle Verma, inaugurated the shelter.
During the event, Foodman Vishal Singh honored Nicolle Verma by presenting her with a memento. Mrs. Nidhi Sharma and Avantika Yadav, associated with the organization, welcomed her with garlands. Following this, Nicolle Verma distributed essential items to the attendants and also handed out fruits. She became emotional remembering her grandmother on her birth anniversary.
On this occasion, she also inaugurated the “Veena Verma Sevalaya” in memory of her grandmother, Veena Verma, to serve the attendants. She expressed, “I feel proud that my family is engaged in nation-building as well as social service. Today, in collaboration with Vijay Shree Foundation founder Foodman Vishal Singh Ji, I feel immensely proud to dedicate this shelter for the poor, helpless, and needy attendants of patients battling serious illnesses like cancer. I am honored to be associated with the Hunger-Free World Mission for humanity.”
Inspired by the continuous humanitarian service provided by Vijay Shree Foundation over the past 17 years, Nicolle Verma donated 10 lakh rupees to support the cause. The purpose of this donation is to ensure that services continue for the needy attendants of patients suffering from severe illnesses in hospitals, as facilitated by Foodman Vishal Singh.
It is noteworthy that Dr. Abhishek Verma’s family has a legacy of public and philanthropic service. They are helping millions to carry forward the values and service work of their parents. On the occasion of his mother’s birth anniversary, Dr. Abhishek Verma dedicated this state-of-the-art permanent shelter at Lucknow Medical College to serve the attendants of patients through the Vijay Shree Foundation.
Supporting Foodman Vishal Singh’s Hunger-Free World mission, Dr. Abhishek Verma assured that he would continually support keeping this flame of humanity alive. He also promised to assist in providing medicines to the helpless patients.
Continuing her grandmother’s legacy of service, Nicolle Verma personally served food to the needy patients and attendants. She said, “It is our good fortune to have received the joy of doing this noble work today through Foodman Vishal Singh. I have taken another step forward in carrying my family’s values and cooperation by joining hands with the Vijay Shree Foundation. My father taught me to serve and help the needy, and I feel happy when I bring a smile to someone’s face.”
On the birth anniversary of the late Veena Verma, the event organizer, Vijay Shree Foundation founder Foodman Vishal Singh, said, “We feel proud and happy that Dr. Abhishek Verma, a globally renowned business tycoon, has extended his support to uplift our country from the hunger index. Today, on his mother’s birth anniversary, he inaugurated a state-of-the-art permanent shelter at Lucknow Medical College, which will always be helpful for the needy attendants of patients. It is a pleasure for me and the organization to receive the affection of Mr. Verma.”
The event was attended by General Manager Verma Family Office Hemant Garg, Sonu Rajput, and the organization’s volunteers, including Sandeep Singh, Parmeshwar Ji, Prashant Rao Gautam, Balram Singh, Ramesh Chaudhary, Suman, Jeetu, Anil, Suraj, Vinay, Manish Bhadauria, Manas Mehrotra, Vivek, Apurv, Happy, and others.