L&T buyback: Should investors tender their shares? Check analysts' views

L&T share buyback: The much-talked-about share buyback offer by the engineering and construction major Larsen & Toubro (L&T) opened on September 18, 2023, and shall remain open until today (September 25). During this period, investors in the conglomerate have the option to surrender their shares and go home with substantial cash. 

The buyback price stands at Rs 3,200, and the share offered for buyback is 3.12 crore. The stock on Monday ended at Rs 2,919.60, up 0.30 per cent on the BSE. 

It must be noted that the company recently increased its buyback price by Rs 200 to Rs 3,200 from Rs 3,000 earlier. Additionally, it reduced the number of shares to be bought back from 3.33 crore to 3.12 crore shares, representing 2.22 per cent of the total paid-up equity shares of the company. The buyback size stands at Rs 10,000 crore, and the buyback is being done via the tender route.

Should you tender your shares?

Most analysts suggest retail investors tender their shares in the buyback offer as the buyback price is at an impressive premium to the current market price, and they can use the proceeds to buy shares of the company again at a lower price.

Khadija Mantri, Associate VP, Research, Sharekhan by BNP Paribas, says, "We recommend investors tender their shares in the L&T buyback, as the buyback price of Rs. 3,200 per share is at a premium of nearly 9–10 per cent from its current market price. Although the acceptance ratio and allotment are likely to be low as the company would be buying back only 2.2 per cent of the total equity, which is 3.125 crore shares, this is the first-ever buyback by the engineering conglomerate, and therefore investor interest is likely to be high for the same."

G Chokkalingam, Founder and Managing Director of Economics Research, gives three reasons why investors should participate in the buyback offer. They are:

• The buyback is being done at a good premium to the market price. Hence, investors can buy the same quantity from the market at a lower price.
• The capex cycle has improved, which is positive for L&T and
• Small and mid-cap stocks look risky as of now; therefore, large-cap stocks should outperform them in the short term.

Ambareesh Baliga, an independent market expert, says, "Retail investors should tender their shares because their acceptance ratio is better. They can again buy the shares at a lower price. However, it doesn't make sense for high-net-worth individuals (HNIs) to participate in the offer."

Sudip Bandyopadhyay, Group Chairman, Inditrade Capital, on the other hand, says that investors with a short-term horizon can surrender the shares and collect the money; however, those with a long-term view should hold on to shares as L&T has a significant potential to move up from the current levels as well as from the Rs 3,200 level. "So, it depends on the time horizon the investor has," the expert told Zeebiz.com. 

L&T share price

L&T shares have given impressive returns to its investors, as the stock has rallied 53 per cent over the past one year. In comparison, the benchmark S&P BSE Sensex has risen 14 per cent during the window.