Why L&T Share Price is Rising

In the midst of volatile market, one stock has emerged as a beacon of resilience and growth - Larsen & Toubro (L&T).

The year 2023 witnessed a remarkable performance from L&T shares as they defied the erratic swings of the market to hit back-to-back highs.

On 26 July 2023, L&T shares scaled unprecedented heights, reaching a record high of Rs 2,670. What makes this achievement even more impressive is that the stock has managed to sustain its position near this pinnacle ever since.

While the broader market grappled with a 2.5% decline in the S&P BSE Sensex during the same period, L&T charted an extraordinary ascent, surging by an impressive 14%.

But the story doesn't end there. In this historic moment, L&T's relentless back-to-back rally propelled its market capitalisation to cross the Rs 4 trillion mark.

Here's what is driving the stock to these elevated levels.

#1 Revised buyback price

Larsen & Toubro's (L&T) shares saw a robust start on 12 September, opening nearly 4% higher and reaching a new record high at Rs 2,997.75.

This surge followed L&T's decision to raise the floor price for its Rs 100 billion (bn) mega-buyback program by almost 7%, setting it at Rs 3,200 per share, compared to the previous Rs 3,000 per share.

The motivation for this floor price revision stemmed from the remarkable increase in L&T's share price since the initial announcement of the buyback program back on 25 July.

During this period, L&T shares gained nearly 15%, surpassing their previous record high of Rs 2,928.70.

The previous floor price offered only a modest 3.7% premium over the closing price of Rs 2,894.20 on the preceding Monday.

In contrast, the new floor price offers investors a substantial premium of nearly 11% over the stock's Monday closing price.

Notably, 12 September also marked the record date for investors to become eligible to participate in the buyback offer, prompting a flurry of interest from investors keen to meet the deadline.

However, the specific timeline for the opening and closing of the buyback issue has yet to be officially announced.

L&T's management clarified that the primary objective of the buyback is to enhance the company's return on equity (RoE), aligning with one of the core objectives of their five-year strategic plan, 'Lakshya 2026'. This strategic plan aims to maximise shareholder value by improving RoE.

To successfully realise the proposed buyback plan and achieve its RoE objectives, and in light of the current market sentiments, the company has opted to raise the buyback price.

This marks L&T's second attempt at offering a buyback, following an unsuccessful attempt in 2018.

#2 Big order win

Engineering conglomerate Larsen & Toubro (L&T) has secured a multi-billion-dollar contract from Saudi Aramco, according to informed sources. According to media reports, the total value of the order at US$ 3.9 billion (bn) (equivalent to Rs 324.6 bn).

According to MEED (formerly Middle East Economic Digest), L&T is one of the three contractors to win different packages for Saudi Aramco's US$ 10 billion expansion at its Jafurah unconventional gas production project in Saudi Arabia.

L&T has been chosen as the contractor for Package 1, valued at US$ 2.9 bn, and Package 3, worth US$ 1 bn, according to the MEED ( Middle East Economic Digest) report.

With a combined value of US$ 3.9 bn, this represents one of L&T's largest order wins in recent history in value terms.

To provide context for the magnitude of this latest order win, during the entire three-month period ending June 2023, L&T reported total order wins amounting to Rs 655.2 bn.

What next?

Going forward, Larsen & Toubro (L&T) plans to expand its focus on green hydrogen projects in global markets, aiming to strengthen its presence in the sustainable energy sector.

The company has already made significant contributions to renewable energy projects, successfully executing large-scale solar installations and playing a key role in the commissioning of wind turbines.

Additionally, L&T has actively engaged in green infrastructure projects, emphasising the construction of sustainable buildings and eco-friendly urban developments.

L&T also signed an agreement with McPhy Energy, a French electrolyser technology and manufacturing company, to set up a 1 GW manufacturing facility.

The company is already setting up a green hydrogen plant with a capacity to produce 45 kg of hydrogen per day for captive use.

It has already signed an agreement with IOC to manufacture and sell electrolysers used in the production of green hydrogen.

How shares of L&T have performed recently

L&T share price is up 41% in 2023 so far. In the past one year, it has increased by 48%.

L&T touched its 52-week high of Rs 3,009 on 12 September 2023. Its 52-week low was Rs 1,793.4 touched on 29 September 2023.

About L&T

Larsen & Toubro Ltd (L&T), is an Indian multinational conglomerate company, with business interests in engineering, construction, manufacturing, technology, information technology, and financial services, headquartered in Mumbai.

The company is counted among the world's top five construction companies. It was founded by Henning Holck-Larsen and Soren Kristian Toubro, who were two Danish engineers.

L&T has an international presence, with a global spread of offices. A thrust on international business has seen overseas earnings grow significantly.

To know more about the company, check out L&T fact sheet and quarterly results.

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