TCS proposes share buy-back

Posted February 17, 2017

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).

IDBI Capital's Urmil Shah believes that TCS could announce a buyback of around $2 billion, "TCS can do buyback of maximum of Rs 20,900 crore or 25% of networth".

TCS did not disclose the size of the buyback, though.

India's largest software company Tata Consultancy Services (TCS) today said its board will meet next week to consider share buyback.

Infosys had liquid assets, including cash and cash equivalents and investments worth Rs 35,697 crore (about Dollars 5.25 billion) on its books at the end of December 2016. The red flag was raised days after Vishal Sikka took over at the helm of Infosys on August 1, 2014.

Two of Infosys' former CFOs - TV Mohandas Pai and V Balakrishnan - recently exhorted institutional investors to raise questions about the huge cash pile on the company's books, saying investors have an obligation to protect their investment. In mid-morning trade on BSE, the scrip was quoting at Rs 2,440.10, over 1% higher than Wednesday's close price of Rs 2,415.70 per share.

TCS' outgoing MD N Chandrasekaran said that investors had suggested that the company should distribute its excess cash either in the form of dividends or through a share repurchase programme. Given the headroom allowed by securities laws, the company could do a buyback ranging between Rs 6,536 crore to Rs 16,340 crore.

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.

Buyback is the purchase by a company of its outstanding shares, which results in reduction of the number of shares in the open market.

Analysts also said that companies considering a buyback would "trigger a new trend".