Tata Consultancy Services (TCS), the country’s largest IT services player, could propose a share buyback next week when it announces its first quarter results for the current fiscal, analysts at Jefferies said in a note.

The board of TCS will meet on July 12 to consider the results for the quarter ended June 30, 2023.

However, the Tata group firm has not yet announced any share repurchase proposal to be considered by its directors.

"We believe TCS could announce a buyback as well. Commentary around nature/tenure of deals, sales/deal cycles, pricing, vendor consolidation and attrition would garner attention. While positives should be taken with caution, negatives could raise concerns," Jefferies noted.

Apart from TCS, HCL Technologies will announce its first-quarter results on July 12, followed by Infosys on July 20.

At the company's AGM last week, TCS chairman N. Chandrasekaran made it clear that there may be volatilities in the near term.

The advantages

In a buyback, a company acquires its shares from the market or from shareholders, which are extinguished.

It improves earnings per share and supports the share in poor market conditions while returning surplus cash to shareholders.

A share buyback is also a tax-efficient way to return money to shareholders. Such programmes witness good responses when market conditions are weak.

TCS had come out with an Rs 18,000 crore buyback in March last year, offering to repurchase four crore shares at Rs 4,500 apiece.

The offer got a strong response from shareholders as they tendered more than 30 crore shares, which was 7.5 times more than the offer size.

TCS had then said that parent Tata Sons, which held about 266.91 crore shares, intended to tender 2.88 crore shares.

Tata Investment Corporation Ltd, which held 10.2 lakh shares, would offer 11,055 shares in the buyback.

It was the fourth repurchase from the IT services giant with the earlier programmes coming in 2020 of Rs 16,000 crore, and similar sums each in 2017 and 2018.

TCS last month got embroiled in a "bribes-for-jobs" scandal, with two whistleblowers alleging that senior employees of the company had accepted bribes from staffing firms.

TCS chairman N. Chandrasekaran had said at the company's AGM last week that action had been taken against six employees and six staffing firms.

The TCS share price on Tuesday moved up 1.12 per cent or Rs 36.60 to Rs 3,308.00 on the BSE.

Wipro success

The recent buyback programme of Wipro that concluded on June 30 brought smiles to retail investors of the Bangalore-based firm as it reportedly fixed an acceptance ratio of 77.4 per cent — meaning if a retail investor tendered 500 shares, 387 were accepted for the buyback. The record date for the repurchase was fixed at June 16.

While the share buyback price was Rs 445 per share, the closing price on the record date was Rs 381.30, a premium of nearly 17 per cent.