Now that IT index in record high market is also climbing new highs and yesterday (December 9, 2020) only we saw traction in IT stocks (with the record high hit on the Nifty IT index), here is given below whether should an investor tender his or her shares in the buyback announced by companies in the sector i.e. TCS and Wipro.
Details on the buyback of the 2 companies:
TCS: Buyback size- Rs. 16000 crore
Buyback opens- December 18 and will close on January 1, 2021
Record date: November 28,2020
TCS Buyback price: Rs. 3000 per share
LTP of TCS: Rs. 2810.8 per share
Wipro buyback size: Rs. 9500 crore
Buyback record date: December 11, 2020
Buyback price of Wipro: Rs. 400 per equity share
LTP- Rs. 359.5 per share
Experts advise to hold TCS shares for long term and opt for Wipro buyback
For short term gains, experts advise investors to tender their shares in the buyback of both TCS and Wipro. This is to bag the short term gains as the buyback price is substantially higher than the current market price.
In the case of TCS buyback, the acceptance ratio as expected by senior equity research analyst shall be in the range of 50-75 percent which will imply just 5.4-8 percent return for investors. There is not seen a short term opportunity in the case of TCS buyback. On the other hand for Wipro, acceptance ratio for Wipro buyback is estimated at 60-80 percent which will give potential return of 8.2% to 11%.
So, Wipro buyback can be participated into by small investors for short term gains and TCS buyback can be given a miss and TCS shares can be held for long term given the positive outlook for the IT industry as well as strong presence of the company and uptick in the economy going forward.