Sea­son of Buy­backs: TCS may Head Down Cog­nizant Route

Board to con­sider pro­posal at Fe­bru­ary 20 meet­ing; In­fosys and Wipro could be next in line

The Economic Times - - Front Page - Jochelle.Men­donca @times­group.com

(As of Dec 31, 2016)

In­vestors have been push­ing for a share of bil­lions of dol­lars that soft­ware ex­porters have on their books

Cog­nizant had said it would return $3.4 b to share­hold­ers in div­i­dends and in­creased buy­backs ₹ Mum­bai: Tata Con­sul­tancy Ser­vices said its board will con­sider a buyback next week, be­com­ing the lat­est IT com­pany to de­bate a hot-but­ton is­sue as in­vestors push for a share of bil­lions of dol­lars that soft­ware ex­porters have on their books amid slow­ing growth and shrink­ing re­turns. The move comes less than two weeks af­ter ri­val Cog­nizant said it would return $3.4 bil­lion to share­hold­ers — in div­i­dends and in­creased buy­backs — af­ter ac­tivist hedge fund El­liott Man­age­ment took aim at the com­pany’s cap­i­tal-al­lo­ca­tion pol­icy. Tech­nol­ogy com­pa­nies such as In­fosys and Wipro are fac­ing sim­i­lar pres­sure and could be next, an­a­lysts said.

“The board of di­rec­tors will con­sider a pro­posal for buyback of eq­uity shares of the com­pany at its meet­ing to be held on Fe­bru­ary 20,” TCS, In­dia’s largest IT com­pany, said in a stock ex­change fil­ing.

The com­pany had $5.69 bil­lion in cash and cash equiv­a­lents and in­vest­ments on its books as of De­cem­ber 31 last year. Free cash flow gen­er­a­tion crossed $1 bil­lion in the De­cem­ber quar­ter. ET had ear­lier re­ported that fol­low­ing El­liott’s letter to Cog­nizant in Novem­ber, in­vestors had be­gun to ask In­dian IT com­pa­nies to boost buy­backs and com­pen­sate share­hold­ers amid growth un­cer­tainty. Buy­backs are a key topic of con­ver­sa­tion at the an­nual meet­ing of the Nasscom lobby group cur­rently tak­ing place in Mum­bai. The board of Mpha­sis ap­proved buy­backs worth a lit­tle over .₹ 1,100 crore on Jan­uary 31. Other IT com­pa­nies are likely to de­cide soon on whether to adopt a sim­i­lar tack. Higher taxes on div­i­dends and eas­ier buy­backs — they can be con­ducted on ex­changes — have in­creased their ap­peal, said Am­bit Cap­i­tal an­a­lyst Sa­gar Ras­togi. “We had pointed out that Cog­nizant’s announcements would likely re­sult in its peers be­com­ing more dis­ci­plined about their cash pay­out,” he said.

Among In­dia-listed com­pa­nies, In­fosys and Wipro have the most cash as a pro­por­tion of mar­ket cap­i­tal­i­sa­tion and should con­sider re­turn­ing some of it to share­hold­ers, he added.

Among In­dia-listed IT com­pa­nies, In­fosys and Wipro have most cash as a pro­por­tion of mar­ket cap

In­dia is al­ready a cost-ef­fi­cient satel­lite launcher. Isro’s launch cost is around $15 mil­lion on the PSLV. Com­par­a­tively, SpaceX charges up to $60 mil­lion and China $70 mil­lion. The bill can be $150 mil­lion for the Euro­pean Union’s Ari­ane space launch ve­hi­cles. “While we are cost-ef­fi­cient, we must also work to of­fer the en­tire range and launch more fre­quently to be­come a re­li­able part­ner,” said an of­fi­cial. Isro is now look­ing at car­ry­ing pay­loads of up to 5,000 kg in its next series.

High-level dis­cus­sions are also on to rope in the pri­vate sec­tor in in­dus­tries an­cil­lary to the launch ac­tiv­ity so that Isro can fo­cus on the high-end side of the in­no­va­tion chain, an of­fi­cial said. “Given the num­ber of coun­tries that are seek­ing slots, one can as­sume there is grow­ing con­fi­dence in Isro. Satel­lite ap­pli­ca­tions are only di­ver­si­fy­ing, hence launches are a grow­ing mar­ket and that’s why MTCR mem­ber­ship was timely,” an of­fi­cial told ET.

The board of Mpha­sis ap­proved buy­backs worth a lit­tle over 1,100 crore on Jan­uary 31

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