TCS share buyback: A good opportunity for retail investors?


IT giant Tata Consultancy Services (TCS) on Saturday announced that the company has fixed Wednesday, February 23,2022, as the record date for the purpose of determining the entitlement and the names of the equity shareholders who shall be eligible to participate in TCS’ share buyback.

The IT company, while announcing its third quarter earnings last month, had unveiled an upto 18000 crore buyback offer entailing 4 crore equity shares at 4,500 apiece. TCS promoters – Tata Sons and Tata Investment Corporation Ltd – intend to participate in the buyback offer by tendering about 2.88 crore shares.

“Fundamentals of TCS have never been better. TCS being the leader of the tech pack continues to generate free cash flows in geometric proportions, and the latest buyback announcement is music to the market’s ears – as it underlines the management confidence,” said Sreeram Ramdas, Analyst, Green Portfolio.

A share buyback, also known as share repurchase, is a corporate action to buy back its own outstanding shares from its existing shareholders usually at a premium to the prevailing market price. 

“The buyback is coming at an over 18% premium, and from what we have seen in the past, retail investors get above 70% acceptance when they tender their shares. All in all, this might be a good opportunity for market participants with a short-term horizon. Even though the valuations are expensive compared to their close peers, long term investors can continue to hold the stock,” Ramdas added.

This is TCS’ fourth and biggest buyback in the past 5 years. The previous buyback of the TCS, worth about 16,000 crore, had opened on December 18, 2020, and closed on January 1, 2021.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

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