TCS plans an­other share buy­back; shares up 2.43%

Financial Chronicle - - FRONT PAGE - FC BUREAU

SHARES of Tata Con­sul­tancy Ser­vices TCS), In­dia’s largest com­pany by mar­ket cap­i­tal­i­sa­tion, jumped by al­most 3 per cent on Wed­nes­day af­ter the com­pany in­formed stock ex­changes that its board will con­sider share buy­back on June 15.

TCS shares fi­nally set­tled the day at Rs 1,824.20 on BSE, 2.43 per cent higher than its pre­vi­ous close. Its mar­ket cap­i­tal­i­sa­tion soared by around Rs 17,000 crore to Rs 6.98 lakh crore from 6.81 lakh crore a day ear­lier.

AP Shukla, pres­i­dent, Join­dre Cap­i­tal Ser­vices, said, “The buy­back will boost the in­vestor sen­ti­ment as well as the pro­mot­ers as it will lead to higher profit as num­ber of shares will re­duce and in fu­ture more profit can be dis­trib­uted among the share­hold­ers.”

The Mum­bai-based com­pany, how­ever, did not dis­close any fur­ther de­tails about the buy­back plan like the amount. Dur­ing its Q4 FY2018 earn­ings call, TCS chief ex­ec­u­tive of­fi­cer Ra­jesh Gopinathan had said the com­pany’s in­ten­tion is “to keep cap­i­tal re­turn close to 80-100 per cent of an­nual free cash flow.”

Last year, TCS had un­der­taken a Rs 16,000 crore mega buy­back of­fer, en­tail­ing 5.61 crore shares at a price of Rs 2,850 per eq­uity share. Large in­vestors who par­tic­i­pated in the buy­back that time were Gov­ern­ment of Sin­ga­pore, Copthall Mauritius In­vest­ments and EuroPa­cific Growth Fund.

In buy­backs, pro­mot­ers are ma­jor­ity buy­ers and Tata Sons is ex­pected to buy back bulk of the shares this time too, said a bro­ker who didn’t want to be quoted.

For FY2018, TCS re­turned Rs 26,800 crore to share­hold­ers in both div­i­dends and buy­back. For the full year, TCS' net cash from oper­a­tions amounted to Rs 28,160 crore and free cash flow was Rs 26,360 crore.

Share buy­backs typ­i­cally im­prove earn­ings per share and re­turn sur­plus cash to share­hold­ers, while also sup­port­ing share price dur­ing pe­riod of slug­gish mar­ket con­di­tion. In­dian IT com­pa­nies have been un­der pres­sure to re­turn ex­cess cash on their books to share­hold­ers through gen­er­ous div­i­dends and buy­backs.

Many IT firms, in­clud­ing In­fosys (Rs 13,000 crore) and HCL Tech­nolo­gies (Rs 3,500 crore), had un­der­taken buy­back schemes last year.

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