TCS Rs 17,000 Crore Buyback Record Date: How Many Shares Short-Term Traders Can Buy?

Tech giant, Tata Consultancy Services (TCS) has fixed November 25 as the record date for the purpose of determining buyback shares entitlement. TCS has declared a buyback plan of Rs 17,000 crore at a floor price of Rs 4,150 per share. All investors are eligible for the buyback offer.

TCS has proposed to buy back up to 4.09 crore equity shares at a face value of Re 1 each. The size of the buyback is up to Rs 17,000 crore.

For the buyback, TCS has fixed a floor price of Rs 4,150 per piece, which is at a 15.6% discount from the current market price. On November 17th, TCS shares stood at Rs 3,502.65 with a market cap of over Rs 12.81 lakh crore. TCS is the second largest company in India after Reliance and is the largest IT firm in terms of market share.

How should investors invest in TCS buyback:

According to Prashanth Tapse, Research Analyst-Sr VP Research, Mehta Equities, "Short-term traders can buy TCS before record date (25th Nov 2023) and use the opportunity to generate decent returns based on assumed entitlement ratio. Based on the buyback rate of Rs 4150, short-term investors can generate 18% ROI based on a price of Rs 3519 (November 16). In addition, investors can get tax benefits as the income generated from this buyback of shares is tax exempted.

TCS announced the record date on November 15.

Mehta said, "We advise investors to buy 48 shares (Rs 200000/4150) to get maximum entitlement under the Rs 200000 retail category."

In the long term, Mehta added, "we continue to be optimistic on the IT sector wherein TCS and INFY would remain investors' favourite counters to hold."

The current buyback is in--line with TCS' shareholder-friendly capital allocation practices of returning excess cash to shareholders, thereby increasing shareholder value in the long-term and improving the Return On Equity.

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.

After Q2 results in October, 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."

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.

In Q2FY24, TCS earned a consolidated net profit of Rs 11,342 crore, which is attributable to the shareholders of the company. The Q2FY24 PAT witnessed single-digit growths of 2.4% QoQ and 8.7% YoY. Consolidated revenue from operations stood at Rs 59,692 crore, rising by a fractional 0.5% from Rs 59,381 crore in Q1FY24, but witnessed a growth of 7.9% from Rs 55,309 crore in Q2 of FY23. In constant currency, the revenue growth came in at 2.8% YoY. However, dollar revenue was $7.2 billion for the quarter, declining by 0.2% sequentially which is for the first time since the April-June quarter of FY20.