TCS buyback: Opening, closing dates fixed; retail entitlement at 17%

Indian IT major Tata Consultancy Services Ltd (TCS) has set December 1, 2023, as the opening date for its ₹17,000-crore share buyback offer, and it will close on December 7, 2023. The last date of receipt of completed tender forms and other specified documents, including physical share certificates, is December 7, 2023.

The ratio of the buyback for small shareholders is 17% and for general category shareholders, it is 0.96%. There are 22,48,078 small shareholders of the company, with an aggregate shareholding of 3,65,91,608 equity shares as of the record date, which constitutes 1% of the total paid-up equity share capital and 89.33% of the maximum number of shares proposed to be bought back as part of the buyback.

"The Company believes that the Buyback is not likely to cause any material impact on the profitability or earnings of the Company except to the extent of reduction in the amount available for investment, which the Company could have otherwise deployed towards generating investment income,” TCS says via a letter of offer filed with the stock exchanges.

Assuming full response to the buyback, the funds will not exceed ₹17,000 crore, excluding transaction costs, applicable taxes, and other incidental and related expenses, says TCS.

TCS says the funds will be sourced out of the free reserves, and is in line with the company’s “shareholder-friendly capital allocation practices of returning excess cash to shareholders”, thereby increasing shareholder value in the longer term, and improving the return on equity.

The TCS board, at its meeting held on October 11, 2023, had approved a proposal to buyback up to 4,09,63,855 equity shares for ₹17,000 crore, representing 1.12% of the total paid-up equity share capital, at ₹4,150 per equity share.

The second largest Indian company in terms of market capitalisation had fixed November 25, 2023, as the record date for determining the entitlement and the names of the equity shareholders who will be eligible to participate in the buyback.

As per the latest shareholding pattern, promoters own a 72.30% stake in the company, while a 12.5% stake is held by foreign portfolio investors. A total of 5.91% stake is owned by insurance companies, while 3.46% is owned by mutual funds and UTI. Only 5.16% of shares of the company are owned by the public.

Before this, TCS had rolled out share buybacks in the years 2022, 2020, 2018 and 2017. The IT major bought back shares worth ₹66,000 crore in these buybacks.

TCS has a good dividend track report of returning cash to shareholders in the forms of dividends since its listing, through interim dividends during quarters, and final dividends at the year-end.

For the quarter ending September 30, 2023, the IT bellwether reported an 8.7% year-on-year (YoY) rise in consolidated net profit at ₹11,342 crore as against ₹10,431 crore in the same period last year. The revenue from operations of the IT major stood at ₹59,692 crore in the September quarter this year, up 10% (YoY) as against ₹55,309 crore in the same period last year.

The TCS stock closed 0.37% up at ₹3,470.45 on the BSE today.