TCS Buyback 2023: Rs 17,000 Crore Issue Now Open; Should You Tender Shares?

Tata Consultancy Services (TCS) share buyback programme is now open. The IT giant had in October, along with its quarterly results, suggested its intent to buy back Rs 17,000 crore worth shares at a premium price of Rs 4,150 per share through tender route.

The stock has risen around 7 per cent this year, while the benchmark Nifty has gained 11 per cent during the period.

The record date for TCS buyback was November 25.

Small shareholders, which are categorized as those with investments totaling 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.

What Analysts Say?

Those holding TCS’s shares for long-term investment in their portfolio worth less than Rs 2 lakh on November 25 could use the buyback route and tender their shares, a maximum of 57 shares, to get a premium buyback price of Rs 4,150, Sharekhan said.

Post the buyback settlement, investors can again buy back the same numbers of shares accepted in the buyback at the prevailing market price for long-term investment and continue to hold unaccepted shares in the portfolio, it added.

“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,” said Sharekhan.

Prashanth Tapse, Research Analyst-Sr VP Research, Mehta Equities, said that 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 percent ROI based on last trading price of Rs 3,500.

“In addition, investors can get tax benefits, as the income generated from this buyback of shares is tax exempted,” he said, adding 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.