Should you participate in the TCS buyback? Here are the highlights

The buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer route.

The board of directors of the IT bell-weather - Tata Consultancy Services Ltd (TCS) has approved a proposal to buy back up to 4 crore equity shares for an aggregate amount not exceeding Rs 18,000 crore, being 1.08% of the total paid-up equity share capital, at Rs 4,500 each.

It is noteworthy to recall that in 2021, 2017 and 2018 TCS had resorted to similar share buybacks of Rs 16,000 crore in size each. In 2021, it bought back more than 5.33 crore shares at Rs 3000 a piece. The promoter participation was to the tune of Rs 10,000 crore for 33,325,118 shares in the last buyback.

The current promoter holding is at 72.19% (267 crore shares) as of January 07, 2022, as stated by the company in its exchange filing. It is fair to anticipate promoter participation in the share repurchase scheme in line with the earlier scheme, which will be a positive signal for potential upside for the stock in the long run.

So, what’s in store for the small shareholders? The reservation for the small shareholders would be around 60 lakh shares. Those who are looking for a short term opportunity can expect a gain of upto 16% in two months approx. ( The difference in the CMP- Rs 3898 and Buyback Price – Rs 4500). The total tender amount under this category is restricted to Rs 2,00,000, so maximum gain can be to the tune of Rs 27,000 approx ( for 45 shares tendered and subject to 100 % acceptance ).

The likely acceptance ratio, record date and buyback completion date would be clear in the days to come. A good acceptance ratio would mean a significant gain to smallholders, given the amount received on share repurchase would be exempt u/s 115QA, in the hands of shareholders.

Meanwhile, on the earnings front, India’s largest IT company along with its peers Infosys and Wipro has reported its financial result for the third quarter. Consolidated revenue from operation stood at Rs 48885 crore, rising 16% YoY basis. The consolidated net profit for the quarter rose by 12.3% YoY basis at Rs 9769 crore. It also announced a third interim dividend of Rs 7 per share.

The shares of the IT giant closed at Rs 3898 on the bourses today.