TCS Announces Rs 16,000-Crore Buyback

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Tata Consultancy Services Ltd.’ board approved a proposal to buy back up to Rs 16,000 crore worth of shares to reward stakeholders.

India’s largest software services outsourcer will repurchase 5.33 crore shares, or 1.42% of the total paid-up equity, at Rs 3,000 apiece, it said in an exchange filing. That is a 9.6% premium to Wednesday’s closing price.

It’s the third buyback by the company in four years, and the first by an IT firm this fiscal. Mumbai-based TCS had previously made buybacks worth around Rs 16,000 crore each in 2017 and 2018 as part of its long-term capital allocation policy of returning excess cash to shareholders. Both buybacks were conducted at a premium to the company’s market value.

TCS shares have rallied since it announced its latest buyback plan on Monday, making it the first Indian company after Reliance Industries Ltd. to cross the Rs 10-lakh-crore market capitalisation mark. At the end of trading on Wednesday, TCS’ market value stood at Rs 10.27 lakh crore.

The buyback is a positive development for the company and the sector, given it could be a precursor for other IT companies to follow suit, Jyoti Roy, equity strategist at Angel Broking, had said prior to the announcement. Most IT companies have large surplus cash on books that can be used to reward shareholders either in the form of dividends or buybacks, Roy said.

The company, on Wednesday, reported its quarterly results for the July-September period. Profit rose 6.6% sequentially while margin bounced back. The board also approved a second interim dividend of Rs 12 per share.

Shares of TCS closed 1.42% higher before the buyback and earnings announcement. That compares with a 0.66% gain in the benchmark Nifty 50 Index.

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