TCS approves ₹16,000 cr share buyback at over 17% premium
Shares of India’s biggest IT firm, Tata Consultancy Services Ltd on Friday surged nearly 3% after the company said that its board approved buyback of shares worth ₹16,000 crore at over 17% premium from previous close.
TCS mcap hit ₹7.06 lakh crore or $103.75 billion with its share price closed at a record high of ₹1841.45 on BSE, up 2.75% from its previous close. India’s benchmark Sensex Index rose 0.06% to 35,622.14 points.
In its board meeting , the information technology major said that the company will buy back up to 76.19 million shares aggregating up to 1.99% of the paid-up equity capital via tender route at a price of ₹2,100 per equity share. The buyback price is at a steep 17.17% premium to Thursday’s closing price of ₹1,792.25. Recently, TCS gave one for one bonus to its shareholders. TCS expects the buyback to be completed in the second quarter of this fiscal
“The buyback announcement is in line with TCS’ stated intent to return 80-100% of free cash generated to shareholders through the dividend/ buyback route. Nevertheless, we main- tain our cautious stance on TCS due to expensive valuations with the stock trading at 21X FY2020E earnings” said Kotak Institutional equities in 14 June report.
Last year, TCS announced ₹16,000 crore buyback which got overwhelming response with getting subscribed by 221.39% or 12.4 crore shares. The buyback opened at April 28, 2017 and closed on May 5, 2017.
Analysts say that the share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting stock price during sluggish market conditions.
The three IT major — TCS, Infosys and Wipro, together have more than $12 billion in cash. In addition, they generate about $7.5 billion cash every year, suggesting that these companies have enough cash to reward their shareholders.
MUMBAI: