New Delhi: Engineering major Larsen & Toubro (L&T) on Saturday said market regulator Sebi had denied permission for its ₹9,000-crore share buyback offer. In a regulatory filing to stock exchanges, L&T said the Securities and Exchange Board of India (Sebi) asked it not to proceed with the buyback.
"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," the buyback offer is not in compliance with the Companies Act and Sebi norms, the regulator said in a letter to the company.
L&T had proposed to buy back up to 6.1 crore shares from shareholders at a price of ₹1,475 per equity share, aggregating to ₹9,000 crore. The offer was open to those holding equity shares as on October 15.
A buyback reduces the number of shares available in the open market.
According to company sources, while turning down the proposal, Sebi applied the financial ratio based on the consolidated financial statement of the company.
"It is to be noted that the consolidated financials of L&T include debt of L&T’s financial services business, which by its permitted operating model has a debt equity of nearly 6:1, well within the leverage permitted by the Reserve Bank of India (RBI)," according to sources.
The said basis for computation of the debt equity ratio based on the consolidated financial statement was internal to Sebi and was not specified in its buyback of Securities Regulations, sources said.
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