Shares of Larsen & Toubro declined by over 3 percent in morning trade as investors reacted to Sebi denying permission for its buyback issue.
The engineering major on January 19 said market regulator Sebi denied permission for its Rs 9,000 crore share buyback offer.
In a regulatory filing to stock exchanges, L&T said the Securities and Exchange Board of India (Sebi) has 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 Rs 1,475 per equity share, aggregating to Rs 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 has applied the financial ratio based on the consolidated financial statement of the company.