Tata Consultancy Services (TCS), India’s biggest software services exporter, on Monday approved share buyback plan of up to Rs 16,000 crore. Promoters of TCS currently holds 73.33% in the company. The buyback is 11% premium to the current market price. TCS in a stock exchange filing said that its board approved the buyback of up to 56.1 million shares, or 2.85 percent of its share capital, at Rs 2,850 each. The announcement comes within days of rival Cognizant unveiling its $3.4 billion buyback plan. The development comes at a time when Indian IT companies are under pressure to address shareholders’ concerns, including large amounts of unutilised cash on the books.
“Tata Consultancy Services (TCS) Board of Directors has approved a proposal to buyback up to 5.61 crore equity shares of the company for an aggregate amount not exceeding Rs 16,000 crore,” TCS said in a BSE filing. TCS shares rose as much as 6.1 percent on the news.
The buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer route using the stock exchange mechanism, it added. The buyback is subject to approval of the members by means of a special resolution through a postal ballot, it said. The public announcement setting out the process, timelines and other requisite details will be released in due course in accordance with the Buyback Regulations.
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TCS has Rs 43,169 crore cash and investments on its book at the end of December, 2016.
Following Cognizant’s USD 3.4 billion buyback announcement, industry watchers had warned that floodgates for Indian IT firms could open with investors demanding similar action from domestic firms.
Last week, Tata Sons’s chairman designate N Chandrasekaran had said that the company had received suggestions from investors over the need for certainty on dividend policy along with share buyback to distribute the cash. “These two comments have come from investors and we will discuss it in the board,” he had said. Chandrasekaran also said that over the years, TCS has been increasing its dividend payments to shareholders.
Earlier this month, Infosys’ former CFO V Balakrishnan too had demanded share buyback to protect shareholders’ interest. Infosys, which is India’s second largest software services firm — is sitting on a cash pile of Rs 35,697 crore or USD 5.25 billion (as on December 31, 2016).
Balakrishnan, along with former colleague TV Mohandas Pai, had sought a USD 1.8 billion buyback in 2014 as well, just as its CEO Vishal Sikka was taking over.
While there are reports that Infosys may consider a Rs 12,000 crore share buyback, the company had declined to comment on the issue.
(With inputs from Agencies)