India’s largest IT services provider Tata Consultancy Services (TCS) announced today that it would buy back shares worth Rs.16,000 crore from its shareholders at a price of Rs.2,100 per share. At this price, it is estimated that the company would buy back about 7.6 crore shares from its shareholders.
The buyback price of Rs.2,100 represents a 14% premium on today’s closing price of Rs.1,840 in the BSE. The share buyback program was publicly announced by the company in a filing after receiving approval from its Board of Directors. The company has already informed SEBI on June 13th about the board meeting to decide on the share repurchase program. This is the company’s second stock repurchase in about two years after the Rs.16,000 crore buyback completed last year.
TCS, which has a market capitalisation of about Rs.7 lakh crore, has initiated this share buyback program to distribute its available cash among its shareholders. The company plans to return about 80% to 100% of the cash flow generated in a year to its existing shareholders. As of now, TCS promoters hold about 71.92% stake in the company.
Industry analysts predict that rivals of TCS could also initiate a buyback soon. Infosys is expected to come up with a repurchase this year in addition to the Rs.13,000 crore buyback announced last year. Wipro, on the other hand, has bought back Rs.11,000 crore worth shares from its shareholders last year.
In the recently concluded fourth quarter, TCS announced 5.7% increase in its profit to Rs.6,904 crore on a quarter over quarter basis. The company also reported a 3.8% increase in its revenues. Following the robust performance, the company also announced a share bonus of 1:1 for its shareholders. With the strong profit figures, the company remains the market leader in India when it comes to providing IT services.
Source: Economic Times