Securities and Exchange Board of India (Sebi) has asked engineering and construction major Larsen & Toubro not to proceed with its Rs 9,000 crore share buyback plan as it violated the regulations.
In a letter dated January 18, 2019, Sebi expressed its disapproval in terms of Regulation 8 (ii) of the Buyback Regulations.
“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 of the company, the buyback offer is not in compliance with the Companies Act, 2013 and the SEBI (Buy-back of Securities) Regulations, 2018. You are therefore advised not to proceed with this buy-back offer,” Sebi said in its letter to the company.
The company had proposed a buyback of up to 6.1 crore equity shares from its equity shareholders — as on the record date of 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, L&T said in a stock exchange filing on Saturday.
The company said it made the proposal in accordance with the applicable provisions of the Companies Act, 2013 and the Sebi (Buy-Back of Securities) Regulations, 2018, considering the debt-equity ratio requirement on the basis of standalone financial statements, post buyback.
“Pursuant to the approval of the buyback by the shareholders of the company, a draft letter of offer was submitted to the Securities and Exchange Board of India in terms of the buyback regulations, for their comments,” L&T said.
L&T shares closed two per cent lower at Rs 1,318.25 on the BSE on Friday. There were earlier reports that the government was likely to offer its shares in the L&T buyback offer, which was estimated to fetch about Rs 700 crore to the exchequer.
Sources in the company claimed that while turning down the proposal, Sebi has applied the financial ratio based on the consolidated financial statement of the company.
The government currently holds 1.8 per cent stake in L&T through the Specified Undertaking of the Unit Trust of India (SUUTI). Insurance companies, mainly Life Insurance Corporation, and mutual funds hold around 36 per cent stake in L&T.