On Chandra’s last day as CEO, TCS announces ₹16Kcr share buyback
Buyback price fixed at ₹2,850/share; move to boost investor sentiment, say analysts
MUMBAI: The board of Tata Consultancy Services Ltd on Monday approved a plan to buy back up to ₹16,000 crore of its shares, the software services company said in a notice to the stock exchanges.
The firm has fixed a buyback price of ₹2,850 per share, a 13.7% premium to Monday’s closing price. At that price, TCS can buy back up to 5.6 crore, or 2.85%, of its outstanding shares.
TCS shares closed at ₹2,506.50, up 4.08% on the BSE, on the buyback announcement. This is first share buyback by TCS since its listing in 2004.
The buyback comes at a time when the information technology sector is struggling with pricing pressure and concerns over the likelihood of US curbs on H1B visas given to technology professionals. After Donald Trump became the US President in January, a legislation was introduced in the US House of Representatives proposing to double minimum salary of H1B visa holders to $130,000 from $60,000.
According to analysts, the buyback decision is timely, given that TCS is sitting on a cash pile of ₹43,169 crore and the move will also improve investor sentiment.
“After Cognizant (Technology Solutions Corp) and Accenture , it is the right time for Indian IT firm store ward shareholders ,” said Apurv aP ra sad, senior analyst, institutional equities, HDFC Securities Ltd. On February 9, Cognizant announced a $3.4-billion buyback.
The buyback comes at a time when TCS is preparing to start a fresh innings under new CEO Rajesh Gopinathan after N Chandrasekharan moves to Tata Sons Ltd as chairman of the group holding company on Tuesday. Gopinathan will be replaced as chief financial officer (CFO) and vice-president by V Ramkrishnan, TCS said on Monday
“The buyback will take out a part of cash out of the books; this will enhance the overall return on equity as the proportion of the low-yielding asset ( i.e. cash ) will be reduced in the balance sheet and hence will reward shareholders,” said Sarabjit Kour Nangra, vice-president of research at Angel Broking Ltd.
TCS said the buyback price of ₹16,000 crore does not include any expenses incurred or to be incurred for the repurchase like filing fees, advisory fees, public announcement publication expenses, printing and dispatch expenses, among others.
Currently, promoters hold 73.31% of TCS, while foreign portfolio investors hold 16.89%. The buyback to be made on a proportionate basis under the tender offer route will be to the tune of an aggregate amount not exceeding ₹16,000 crore.
Meanwhile, in a notification to the Bombay Stock Exchange, TCS also announced that Chandrasekaran will be its non-executive chairman from Tuesday, PTI reported. “Tata Sons Ltd has nominated N Chandrasekaran as the chairman of the board of directors of the company in place of Ishaat Hussain from February 21. Chandrasekaran will also take charge as non-executive chairman of the board of directors of the company.”
TCS IS SITTING ON A CASH PILE OF ₹43,169 CR AND IS PREPARING TO START A FRESH INNINGS UNDER NEW CEO RAJESH GOPINATHAN