TCS shares in focus as Rs 17,000 crore share buyback offer to conclude today

The Rs 17,000 crore share buyback offer by the IT major Tata Consultancy Services Ltd (TCS) will conclude on Thursday. The offer kicked off on December 1. Against the buyback size of up to 4,09,63,855 shares, the buyback has seen subscription for 21,74,43,695 shares, as on December 6 closing, BSE data showed. The offer price of the issue was set at Rs 4,150, which is at 15 per cent premium to Wednesday's closing price of Rs 3,603.35 for TCS.

Small shareholders, who owned a maximum of 57 TCS shares on the record date i.e. November 25, can participate in the share buyback. The quota reserved for retail shareholders in the buyback offer stood at 15 per cent. TCS has suggested a buyback entitlement ratio of 17 per cent for small investors.

TCS has a policy of returning 80-100 per cent of free cash flow (FCF) to company shareholders. In FY23, its total payout stood at 110 per cent of FCF. To recall, the size of share buyback announced in 2022 was Rs 18,000 crore. It was also announced at a higher stock price of Rs 4,500 share.

Ahead of the TCS share buyback, CLSA in strategy a note on November 28 said the September quarter results by TCS saw a modest margin and profits beat and strong deal wins -- highest in last six quarters. It expected the buyback to revive investor interest.

"Existing shareholders, who are holding TCS’s shares for long term investment in their portfolio worth less than Rs 2 lakh as on record date (25-Nov-2023), could use the buyback route and tender their shares (maximum of 57 shares), to get benefits premium buyback price of Rs 4,150. Post the buyback settlement, investors can again buy back the same numbers of shares accepted in buyback at prevailing market price for long term investment and continue to hold unaccepted shares in the portfolio," Sharekhan said in a note.

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