India’s largest software services firm Tata Consultancy Services (TCS) will commence its Rs 16,000-crore mega-buyback offer from May 18. The buyback programme, which received shareholder approval last month, will open on May 18 and close on May 31, the company said in a regulatory filing. TCS will dispatch the Letter of Offer for the buyback to eligible shareholders on or before May 16, it added. The share buyback, if successful, will be India’s biggest, surpassing Reliance Industries’ 2012 share repurchase of Rs 10,400 crore.
Last month, TCS shareholders had approved this mega share buyback worth up to Rs 16,000 crore one day prior to the day, the information technology services major announced its quarterly and annual financial results. Earlier, the board of TCS had in February, approved the proposal to buy back up to 5.61 crore equity shares for an aggregate amount not exceeding 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.
Indian IT companies have been under pressure to return excess cash on their books to shareholders through generous 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. TCS had earlier said that it received suggestions from investors over the need for certainty on dividend policy along with share buyback to distribute the cash. The Mumbai-based company has a cash pile of Rs 43,169 crore, which is nearly 10 percent of the company’s market capitalisation. (Read: Don’t cheer high TCS buyback offer price; you may get nothing out of it)
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Last month, TCS’s rival information technology firm Infosys – the second largest – had 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. A smaller peer, HCL Technologies has also approved a buyback of up to 3.50 crore shares worth Rs 3,500 crore. The proposed shares under the buyback represent 2.85 percent of the total paid-up capital at Rs 2,850 per equity share.
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.