TCS Rs 17,000 Crore Buyback: How Many Shares Retail Investors Can Buy Back And What Are The Risks?

India's tech giant Tata Consultancy Services (TCS) has announced a buyback offer worth Rs 17,000 crore. The buyback plan comprises of over 4.09 crore equity shares and has a floor price of Rs 4,150 per share, which is at a premium. Retail investors who are looking to participate in TCS buyback, need to know how many shares they can buy back overall in the offer.

The buyback size represents 1.12% of the company's total paid-up equity share capital. While its buyback price of Rs 4,150 per share is over 16% premium from the current market price on BSE.

TCS shares are moving towards the critical Rs 3,600 mark. On Friday, the largest IT stock settled at Rs 3,570.30 apiece, up by 0.8% on BSE. Its market cap is over Rs 13.06 lakh crore.

The buyback price is at a 15% premium from Rs 3,610.20 per share which was on the October 11th trading session ahead of the offer's announcement and Q2 earnings.

How many shares can retail investors buy back in TCS?

In its research note, IIFL Securities explained that TCS buyback is via tender offer route and the small shareholder reservation, i.e., shareholders with the value of holding less than 2 lakh based on closing price as on specified date is 15%. As the buyback price is kept at Rs 4,150 one can buy up to 48 shares (2,00,000/4,150).

Further, the brokerage highlighted that 15% reservation for retail shareholders means 61,44,578 shares out of ~4.01 crore shares. This implies that 0.17% of the retail shareholding will be taken up from the total outstanding shares. The entitlement ratio comes to ~12.4%.

However, among the risks, IIFL also highlighted that with the run-up to the record date, an increased buying by the retail shareholder can lead to a sharp increase in their shareholding. This can lead to a smaller number of shares getting accepted.

Another risk would be a delay in approvals for the buyback.

Should you buy TCS shares? In its preview note, Nuvama Institutional Equities said, "Management talked about continuing near-term uncertainty driven by weak global macros, leading to delayed decision-making, but the long-term demand environment remains strong. We are tweaking our FY24E/25E EPS (-2.6%/-2.8%). This along with a valuation rollover to 27x average of FY25E and FY26 PE yields a TP of INR4,150 (earlier Rs 4,000); 'BUY' on superior fundamentals and business profile."

If Nuvama's target price is achieved that would also mean TCS has touched its buyback price as well.

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

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.