As L&T eyes Mindtree, Street wary about company's capital allocation plans

Analysts at Jefferies say while the Mindtree acquisition concerns will pass, questionable capital allocation can lead to a sustained de-rating of L&T stock

Just when things are on the mend for India’s engineering and infrastructure major – Larsen and Toubro (L&T), its recent decision to acquire the controlling stake at Mindtree is making the Street jittery. For investors, the acquisition once again raises questions on L&T’s capital allocation plan. Given that the move comes at a time when the capital market regulator – Sebi has clawed down on L&T’s share buyback plan, the Street will also monitor how the company shares the gains from the impending stake sale in its electrical and automation division to Schneider Electric, expected to fetch Rs 14,000 crore.