Tata Consultancy Services (TCS) on Friday announced that its board will meet on January 12 to consider a share buyback.
This is the fourth such re-purchase proposed by the country’s largest IT services firm with the previous ones coming in 2017, 2018 and December 2020.
In a buyback, a company acquires its own shares from the market, which are subsequently extinguished.
Share buybacks generally improve earnings per share, support share prices in poor market conditions and help return surplus cash to shareholders. It can be done either through the tender offer route — where shareholders tender their shares — or from the open market.
Over the past few years, companies such as TCS, Infosys and Wipro and others have used share buyback, apart from dividend, in their capital allocation policies to give back a part of their free cash flow to shareholders.
For the second quarter ended September 30, 2021, TCS had a free cash flow of Rs 9,229 crore. In the previous fiscal, the company had returned Rs 30,660 crore to shareholders in the form of dividends and buyback. TCS’s previous buyback was for the purchase of up to 5.33 crore shares at Rs 3,000 apiece aggregating to Rs 16,000 crore.
While Friday's announcement was made after market hours, the TCS scrip closed with gains of 1.26 per cent or Rs 48 to end at Rs 3,854.85 in the BSE. Market circles expect the company to announce a buyback price of Rs 4,200-4,300 per share.
The focus this time will also be if Tata Sons participates in the share buyback. On the last occasion, the parent had tendered more than 3.33 crore shares, yielding almost Rs 10,000 crore. The holding company of the Tata group currently has a stake of 72.16 per cent in TCS.
TCS, Infosys and Wipro in a rare co-incidence will all declare their results on the same day — January 12.
Passport project
TCS has again been selected by the ministry of external affairs for the second phase of the “Passport Seva Program’’. The company had bagged a Rs 1,000 crore from the government for the first phase of the project in 2008.
The company added that since then it has transformed the delivery of passport-related services, digitised the processes and set global benchmarks in timeliness, transparency, and reliability.
In the next phase of the programme, TCS said that it will refresh existing facilities and systems and develop innovative new solutions to enable the issuance of e-passports and further enhance the citizen experience using technologies like biometrics, artificial intelligence, advance data analytics, chatbots, auto-response, natural language processing, and the cloud.
