TCS proposes share buy-back

Tata Consultancy Services to discuss buyback on February 20

Tata Consultancy Services (TCS), the most valuable company within the Tata Group, will consider a share buyback, which, if approved by its board on February 20, will be its first since its listing in 2004.

"We would like to inform you that the Board of Directors will consider a proposal for buyback of equity shares of the company at its meeting to be held on February 20, 2017", Tata Consultancy Services Ltd said in a BSE filing.

TCS' shares rose by 1.29% and hit a five-month high at R2,446.90 on the BSE on Thursday.

According to a report by CNBC-TV18, Infosys too is likely to consider a share buyback worth Rs 12,000 crore ($1.77 billion).

As of December, TCS had over Rs 43,100 crore in cash and investments, representing almost 9% of its market capitalisation (market capitalisation is the value of a company calculated by multiplying the total number of shares by the present share price). If TCS goes for 10% of its total net worth of Rs 65,360 crore, then it will have to spend Rs 6,536 crore on the buyback programme. "We believe that it would be reasonable for TCS to announce a share buyback of Rs 13,600 crore, which would be 2.9% of its market capitalisation", Shah said. IT services companies are under pressure to return excess cash to shareholders. The announcement comes days after rival Cognizant announced its $3.4-billion buyback plan and amid a market buzz that Infosys might follow suit with a '12,000-crore share buyback.

Last week, Infosys' former CFO V Balakrishnan also demanded share buyback to protect shareholders' interest.

He also added that over the years, TCS has been increasing its dividend payments to shareholders.

Firms buy back shares to increase the value of shares still available by reducing the supply of them and rewarding the shareholders with idle cash in the books. Share buyback boosts the valuation of a stock even if it maintains the same rice-to-earnings (P/E) ratio.

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