Tata Consultancy Services (TCS) board on January 12 approved a share buyback worth Rs 18,000 crore. The Bengaluru-based IT behemoth had decided to repurchase four crore shares or 1.8 per cent of total paid-up equity at Rs 4,500 a piece, according to the regulatory filing. It was the fourth share buyback by India’s largest software services exporter since 2017.
“Further to our intimation dated January 7, 2022 and in terms of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that the Board of Directors of the Company at its meeting held today has approved a proposal to buyback up to 4,00,00,000 (Four crore) Equity Shares of the Company for an aggregate amount not exceeding ₹18,000 crore (Rupees eighteen thousand crore only) (hereinafter referred to as the “Buyback Size”) being 1.08% of the total paid-up equity share capital, at ₹4,500 (Rupees four thousand five hundred only) per Equity Share (hereinafter referred to as
the “Buyback Price”),” TCS said in a regulatory statement.
The buyback will be executed at a premium of Rs 643 from the current share price. On Wednesday, TCS stock ended 1.50 per cent lower at Rs 3,857 apiece on NSE.
“The buyback is proposed to be made from the shareholders of the Company on a proportionate basis under the tender offer route using the stock exchange mechanism,” TCS added.
“The public announcement setting out the process, timelines and other requisite details will be released in due course in accordance with the buyback regulations,” it further mentioned.
TCS had earlier purchased back shares worth around Rs 16,000 crore each in 2017, 2018 and 2020 as part of its long-term capital allocation policy of returning excess cash to shareholders.
What this Share Buyback Means for Investors
Share buyback refers to the repurchasing of shares by the company from the investors. A company often pays shareholders the market value per share and re-absorbs that portion of its ownership that was previously distributed among public and private stakeholders. It’s a tax-efficient way to return money to the investors.
The share buyback offer is a part of TCS long-term capital allocation policy of returning excess cash to shareholders, the company mentioned. Rajesh Gopinathan, TCS chief executive and managing director, had said earlier that the company is focused on its policy to return capital to shareholders.
Share buybacks also help the company to reduce the number of shares in circulation, which can increase the share value and the earnings per share (EPS). In the recent years, share buybacks have overtaken dividends as a preferred way to return cash to shareholders.
During the previous share buyback between December 18, 2020 to January 1, 2021, TCS repurchased shares worth around Rs 10,000 crore. A total of 3.3 crore Tata Sons’ shares were accepted under the offer. Over 5.33 crore equity shares were bought back under the offer for Rs 3,000 apiece.
TCS reported a consolidate net profit of Rs 9,769 crore, up by 12.3 per cent year-on-year for the period ended on December 31. Revenue increased to Rs 48,885 crore, up 16.3 per cent year-on-year during Q3 FY22.