TCS Buyback Offer To Close Today: Should You Tender Shares?

TCS share buyback worth Rs 17,000 crore, which started on December 1, is closing today, December 7. Under the programme, Tata Consultancy Services, India’s largest IT services firm, is buying back up to 4.09 crore equity shares of the face value of Rs 1, at a price of Rs 4,150 per share.

The buyback represents 1.12 per cent of the total issued and paid-up equity share capital of TCS as of September 30.

TCS Buyback: Should You Tender Shares?

Brokerage firm Sharekhan in a note said, “Given the potential acceptance ratio and possible upside for retail/small investors, it is advisable to tender shares in buyback. After the buyback, investors have the option to reinvest in the same number of accepted shares at a relatively lower prevailing market price. Fundamentally, we have a ‘buy’ rating on TCS, with an unchanged price target (PT) of Rs 4,200.”

Prashanth Tapse, research analyst and senior vice-president (research), Mehta Equities, said short-term traders can use the opportunity to generate decent returns based on the assumed entitlement ratio.

“Based on the buyback rate of Rs 4,150, short-term investors can generate around 18 per cent ROI based on last trading price of Rs 3,500,” he said.

Tapse also said that investors can get tax benefits, as the income generated from this buyback of shares is tax-exempt.

“In the long term, they continue to be optimistic about the IT sector in which TCS and Infosys would remain investors’ favourite counters to hold, he said.

Global brokerage CLSA in its note on November 28 said the September 2023 quarter results by TCS saw a modest margin and profits beat and strong deal wins, which were the highest in the last six quarters. CLSA expected the buyback to revive investor interest.

TCS Buyback Eligibility, Other Details

The record date for the TCS buyback was November 25.

Small shareholders, which are categorised as those with investments totalling less than Rs 2 lakh, have been assigned an entitlement ratio of 1 equity share for every 6 shares held as of the record date. This ratio corresponds to approximately 17 per cent.

For other qualifying shareholders, the entitlement ratio is set at 2 shares for every 209 shares held.

If all shareholders exercise their buyback entitlement to the full extent, the promoters’ combined shareholding will rise to 72.41 per cent, up from the current 72.3 per cent.

Tata Sons and Tata Investment Corporation, two holding companies within the Tata Group, have indicated their intention to take part in the buyback, potentially tendering a combined maximum of 2,96,15,048 equity shares.