Proposal for Buy Back of shares of  L&T not  approved by SEBI.

Maintaining of Debt Equity Ratio is one of the requirements under the Buy Back of securities. (Both as per Companies Act and as per the Buy Back  of  Securities . (Both as per Companies Act and as per Buy Back Regulations ).

The provisions as per SEBI and Companies Act are expressed below:

Chapter II Regulation 4 of SEBI (Buy – Back of Securities ) Regulations ,1988

Conditions and requirements for buy-back of shares and specified securities

The  ratio  of  the  aggregate  of  secured  and  unsecured  debts  owed  by  the company  after  buy-back  shall  not  be  more  than  twice  the  paid-up capital and free reserves.

Provided that  if  a  higher  ratio  of  the  debt  to  capital  and  free reserves for the  Company has been notified under the Companies Act, 2013, the same shall prevail.

One of the condition for buy-back u/s 68 (2) (d) of Companies Act, 2013 is that the :

The ratio of the aggregate of secured and unsecured debts owed by the company after buy-back is not more than twice the paid-up capital and its free reserves:

Provided that the Central Government may, by order, notify a higher ratio of the debt to capital and free reserves for a class or classes of companies;

Since each company has to maintain this threshold, probably it has to be ascertained based on companies debt equity (means standalone) and not on consolidated financials.

However ,recently SEBI has denied permission to Larsen & Toubro for its Rs.9000 Core share buy back offer.

Source : 

https://www.financialexpress.com/industry/sebi-nixes-lt-plan-for-rs-9000-crore-share-buyback/1449152/

While turning down the proposal, SEBI has reportedly applied the financial ratio based on the Consolidated Financial Statement of the Company which is not specified anywhere in buyback of securities regulations.

Hence , if the ratio of the aggregate of secured and unsecured debts owned 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 will be assumed not in compliance with the Companies Act  and SEBI norms.

We will track this further when and if we get official documents in this regards.