TCS Buyback 2023: A Look at TCS' Share Buyback History In Last Six Years

TCS Buyback 2023: Today is an important day for TCS shareholders as the company as the company is all set to announce announce its fifth share buyback in six years. Investors who have made their equity investment in TCS shares should note that this is the fifth time that the tech giant is going for a share buyback plan.

Before this, Tata Consultancy Services (TCS) bought back its shares in 2017, 2018, 2020, and 2022. The IT major has bought back shares worth Rs 66,000 crore in the past six years.

A company usually announces a share buyback when it has adequate cash in its reserves and it wants to reward its investors. Share buyback indicates that a company has a strong balance sheet and it is well-equipped to face any business challenges or market uncertainties.

Last week the tech giant announced that its Board of Directors will consider a proposal for buyback of equity shares of the Company on October 11. Alongside, the company is also expected to consider and approve the earnings for the quarter and the six months ended September 2023 on the said date.

TCS Buyback history:

TCS first bought back its shares in the year 2017. In February 2017, the company announced Rs 16,000 crore buyback at an 18% premium to prevailing prices. The initial buyback was followed by two buybacks of Rs 16,000 crore each in June 2018 and October 2020, at a 16% and 10% premium, respectively.

The last time the company announced a buyback was in January 2022. TCS decided to buy shares worth Rs 18,000 crore at a 17% premium.

The maximum limit for a buyback under the Sebi regulations is 25% or less of the paid up capital and free reserves in that financial year. The buyback announcement from TCS comes after its other two peers Infosys and Wipro completed their share buybacks earlier this year. Infosys rolled out its buyback after buying 6.04 crore shares for Rs 9,300 crore in February, while Wipro announced its largest-ever share buyback worth Rs 12,000 crore in June.

What is a buyback and why does a company announce a buyback?

Share Buyback also known as share repurchase is considered a tax-effective method used by companies to reward shareholders. A buyback also suggests how a company views its fair value (the buyback price). It is also seen that the stock price eventually moves in that direction. However, in the case of TCS such movements have been slower than expected.

In a buyback offer, a company usually buys its own outstanding shares to lower the number of shares available on the open market.

What to expect from TCS stock after the buyback offer?

It took 228 sessions for TCS's stock price to top the buyback price it announced in 2017. After the 2018 buyback, it took 67 sessions and after the 2020 buyback, it took 60 sessions for TCS's stock price to top the buyback price. However, the share price of TCS is yet to cross the 2022 (added) buyback price of Rs 4,500.

Thus, it can be said that a buyback announcement does not guarantee a company that its share price will outperform in the following period.

What is the estimated worth of TCS' 2023 buyback offer?

As of June 30, 2023, TCS's cash and cash equivalent stood at Rs 7,123 crore on its balance sheet. This is expected to move up given its track record of generating over Rs 10,000 crore in cash from its operations during a quarter.

According to analysts and market observers, the 2023 buyback is expected to be around Rs 18,000 crore.
On Wednesday, the Board of Directors of the company will also consider the declaration of a second interim dividend to the equity shareholders.

Today, TCS shares were spotted trading 0.28% higher at Rs 3639.45 per share at 9:56 am IST.