TCS Announces Rs 17,000 Crore Buyback, Fixes Floor Price At Rs 4,150 Per Share; Key Details Here

One of the much-awaited buyback offers has been declared on Wednesday! Tech giant Tata Consultancy Services (TCS) has received board of directors approval for the proposal of buyback of up to over 4.09 crore equity shares for an aggregate amount of Rs 17,000 crore. The buyback size represents 1.12% of the company's total paid-up equity share capital.

Further, TCS fixed the buyback price of Rs 4,150 per share, which is at a premium of nearly 15% from the current market price of Rs 3,610.20 per share on BSE by the end of the October 11th trading session.

On Wednesday, Samir Seksaria, Chief Financial Officer, said: "Our focus on improving employee utilization, while driving
productivity improvement and cost efficiency across the organization, has helped us expand our operating margin to 24.3%. We will continue to push the growth, efficiency and innovation levers to further improve our profitability. In keeping with our shareholder friendly capital allocation policy, the Board has recommended a share buyback to the tune of Rs 17,000 crore at Rs 4,150 per share."

TCS said that the buyback is proposed to be made from the existing shareholders of the Company as on the record
date on a proportionate basis under the tender offer route using the stock exchange mechanism. Also, the buyback size does not include transaction costs, applicable taxes and other incidental and related expenses.

Under the pre-buyback, TCS's shareholding pattern as of October 6, 2023, includes promoter companies holding a 72.30% stake in the company. While Foreign Portfolio Investors (FPIs) hold 12.5%, insurance companies are the third largest shareholder with 5.91% stake, followed by Mutual Funds and UTIs who hold 3.46% stake in the company. Indian public and others hold a 5.21% stake in TCS. The rest is held by NRIs, OCBs, Foreign Nationals, Corporate Bodies, Trusts, and AIFs.

The last buyback offer by TCS was of Rs 18,000 crore in 2022, which was oversubscribed by 7.5 times. In this buyback, investors offered 30.12 crore equity shares at the buyback price of Rs 4,500 per share, against the buyback size of 4 crore shares.

Interestingly, TCS shares still haven't touched the buyback price of Rs 4,500 per share of the Rs 18,000 crore buyback offer. In the history of its stock price since listing, TCS' all-time high up till this date is Rs 4,045.50 apiece which was recorded on BSE in January 2022. TCS got listed on BSE and NSE in August 2004.

The stock's current 1-year high and low are at Rs 3,680.00 apiece, and Rs 3,013.05 apiece respectively on BSE.

Apart from this, other buybacks launched by TCS are of Rs 16,000 crore each in 2020, 2018 and 2017.

It will be keenly watched if TCS shares could touch the buy back price of Rs 4,150 crore for the buyback offer of Rs 17,000 crore in 2023 going ahead.

Buy-Back is generally a corporate action in which a company buys back its shares from the existing shareholders usually at a price higher than market price. When it buys back, the number of shares outstanding in the market reduces.

Some of the key reasons for buyback are --- to improve earnings per share; improve return on capital, return on net worth and to enhance the long-term shareholder value; provide an additional exit route to shareholders when shares are undervalued or are thinly traded; provide an additional exit route to shareholders when shares are undervalued or are thinly traded; enhance consolidation of stake in the company; prevent unwelcome takeover bids; return surplus cash to shareholders; achieve optimum capital structure; support share price during periods of sluggish market conditions; and service the equity more efficiently, as per BSE FAQs.

On Wednesday, TCS share price closed at Rs 3,610.20 apiece, down by Rs 19 or 0.52% on BSE.

Investors will react to TCS buyback, dividends and earnings on Thursday.

In the September quarter of FY24, TCS posted a consolidated net profit of Rs 11,342 crore, which is attributable to the shareholders of the company, registering single-digit growths of 2.4% QoQ and 8.7% YoY. Further, in the quarter, consolidated revenue from operations stood at Rs 59,692 crore, rising by a fractional 0.5% QoQ and 7.9% YoY.