Tata Consultancy Services’ proposed share buyback for an amount of up to `16,000 crore has received the consent of shareholders. TCS’ offer is the biggest in the past 18 years. In 2012, Reliance Industries (RIL) had come with a buyback offer of `10,440 crore. Shares will be bought back at a price of `2,850 apiece, nearly 23% higher than Monday’s closing price of `2,320. The approval for the buyback was received on February 20 when the TCS stock closed at `2,505 apiece.
The company said, in an exchange filing, 99.81% of the shareholders who participated in the postal ballot gave their consent to the proposed share repurchase plan.
The buyback represents 2.85% of the total paid-up equity share capital. In February, the board of TCS had approved the proposal to buy back up to 5.61 crore equity shares for an aggregate amount not exceeding `16,000 crore.
The buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer. The company has cash and equivalents of `38,831 crore as of December 31, 2016. The promoters have 73.33% shares in the company as on December 2016. This is the first time TCS will be buying back its shares.
The buyback offer constitutes 21% of the company’s consolidated net worth. The company had a net worth of `76,387 crore at the end of September 2016, data from Capitaline showed. Cognizant Technology Solutions, which has centres in India, announced plans to buy back shares worth $3.4 billion in February 2017. Last week, Infosys said it will pay up to `13,000 crore to shareholders during the current financial year through dividend and/or share buyback.
On March 15, the board of HCL approved the proposal to buyback for an amount of `3,500 crore, for 3.5 crore shares.
A total of 49 companies came with share repurchase offers in the financial year (FY) 2017, worth `34, 648 crore, the highest in 19 years. The government’s dependence on the coffers of cash-rich PSUs to meet its divestment target and the new additional dividend tax regime are attributed as the reasons behind this trend. Buybacks have become the preferred route over dividends, as dividend income in the hands of all residents, domestic companies, trusts or funds except those established for religious, educational or charitable purposes, attracts an additional dividend tax of 10% on dividend income.