Tata Consultancy Services shareholders on Monday approved a proposed mega share buyback worth up to Rs 16,000 crore, even as information technology services major is due to announce its quarterly and annual financial results tomorrow. Shares of TCS – India’s largest information technology services firm – fell today to end at Rs 2,320.85 on BSE, down 0.3% from the previous close.
Earlier February, TCS had announced a share buyback at an attractive 18% premium to its then share price. It had said it would buy back 5.61 crore shares through the tender route at a fixed price of Rs 2,850 per share on a proportionate basis for an aggregate amount of Rs 16,000 crore. However, the buyback would comprise just 2.85% of the company’s paid up capital, implying a very low acceptance ratio.
TCS shares, after rising to a six-month high of Rs 2,584 in March following the news of buyback, have constantly fallen over the last month. It has shed about 4% since February 17, the last trading session before the announcement of the buyback.
Earlier last week, TCS’s rival information technology firm Infosys – the second largest – also said that it has identified $2 billion (or about Rs 13,000 crore) to be paid to shareholders via share buybacks or dividends. Further, another IT major Wipro too is learned to be considering rewarding shareholders by distributing cash through a share buyback, which may amount to Rs 3,000-4,000 crore, topping the size of its last share repurchase in April 2016.
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Cognizant, the US-based Nasdaq-listed firm, which competes directly with Indian IT firms with several of its delivery centres being run out of India, had already announced in January a programme to return $3.4 billion of cash to shareholders through dividends and buybacks.
Shareholders and investors are pressing upon the IT companies to use their huge reserves to distribute cash to them, as opportunities for huge spurts of growth or bulk cash outgo seem unlikely.
Analysts have pointed out to the maturity in the growth of the industry, low valuations, and scope for optimising capital allocation even after providing for any possible big-ticket acquisition.