IT bellwether Tata Consultancy Services has announced the dates of mega Rs 18,000 crore buyback and the offer will open on March 9. The window will close on March 23. The buyback offer will be undertaken at a 17 per cent premium (from the announced date) or Rs 4,500 per share.
Notably, this will be TCS’ fourth buyback and, in the earlier three buybacks, Tata Sons was the biggest beneficiary.
Here’s Everything you Need to Know About the Buyback Offer
TCS Share Buyback: Who can Offer TCS Shares for Buyback?
All investors who held shares of the company as of February 23 can offer their shares in a defined ratio. For the buyback, shareholders holding shares worth Rs 2 lakh or less will be considered under the retail category. While those holding shares worth more than Rs 2 lakh will be considered under the general category.
TCS Share Buyback: How many shares from each category will the company buyback?
TCS said it will buy back 60,00,000 shares from the reserved category and 3,40,00,000 shares from the general category, in which all kinds of shareholders can participate.
TCS Share Buyback: How Many Shares Can be Offered?
That depends on what category you fall in. If you are in the reserved category, the company will buy 14.61 per cent of total shares you hold. That means, TCS will purchase 1 share for every 7 you hold. In the general category, the ratio stands at 1 share for every 108 held.
TCS Share Buyback: What Happens If you Hold Two Demat Accounts?
You are required to tender shares separately from both demat accounts. The company is using PAN to decide the number of shareholders, hence, it will club both applications and then calculate your entitlement ratio.
TCS Share Buyback: How do Investors Tender Shares?
Exchanges will, on the company’s request, provide a separate acquisition window to facilitate placing of sell orders by eligible shareholders. You can contact your broker on how to access that window. Usually every broker has a separate portal to access such corporate actions.
TCS Share Buyback: Can Additional Shares be Tendered?
Investors can tender more shares than their entitlement, and whether these additional shares will be accepted for buyback or not will solely depend on the acceptance ratio decided by the company. The share which are not accepted will be credited back to your Demat account by the RTA.
Investors, whose shares are pledged, are eligible for all corporate action benefits. However, they will have to unpledged the shares before tendering them in the buyback.
TCS Share Buyback: What is the Purpose?
The share buyback, or share repurchase, is when a company buys back its own shares from investors or stakeholders. It can be seen as an alternative, tax-efficient way to return money to shareholders. Buybacks are attractive in tax terms even after considering the 10 per cent tax on long-term capital gains (LTCG).
Usually, companies go for share buyback if it wishes to increase demand in the market. Share buybacks reduce the number of shares in circulation, which can increase the share value and the earnings per share (EPS).
When a company buys back shares, it results in a reduction of the number of shares outstanding and the capital base. To that extent, it improves the EPS and the ROE of the company. When the EPS goes up, assuming the P/E remains constant the price of the stock should also go up.
Analysts say share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting the stock during sluggish market conditions.
Gaurav Garg, CapitalVia, said: “Despite short-term volatility, the outlook for the sector and TCS is bright, thus investors can take advantage of this buyback. Overall, market participants with a short-term outlook may find this to be a favorable opportunity. Those who are holding the shares with a long-term outlook can keep the shares for a long-term horizon in mind.”
In 2021, TCS bought back more than 53 million shares at Rs 3,000 a share and 33.33 million shares were accepted under the offer. In 2017 and 2018 as well, it undertook two buybacks and the size was around Rs 16,000 crore each. At the end of September 2021, TCS had cash and cash equivalents of Rs 51,950 crore.
The latest move comes after Tata Sons bought Air India from the government for Rs 18,000 crore. The firm will pay Rs 2,700 crore to the government and the rest will go to paying debt. Tata Sons holds a 72 per cent stake in TCS currently.
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