Tcs Share Buyback: Everything You Need to Know

TCS, one of India's largest IT companies, has been making waves in the stock market with its share buyback program. The company has been actively buying back its shares from the open market, which has led to a significant increase in its stock price.

The share buyback program was announced in 2020, with TCS planning to buy back up to 5.53 crore equity shares. The company has already completed two tranches of the buyback, with the first tranche seeing the purchase of 2.25 crore shares.

TCS's share buyback is a strategic move to return value to its shareholders. By buying back its own shares, the company is essentially reducing the number of shares outstanding, which can lead to an increase in the stock price.

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TCS will consider the proposal for buyback of shares at the meeting on October 11.

TCS is the first technology company to consider a buyback of its shares in the current fiscal.

The company had cash reserves of Rs 73,993 crore in March 2020, which will be used for the buyback.

TCS' share price had fallen as much as 15% from its 52-week high of ₹4,045.50 on January 18.

The company had a 52-week high of ₹4,045.50 on January 18, before its share price dropped.

Trading in TCS shares started on a positive note on Monday but slipped into the red in tandem with the benchmark indices.

TCS' share price was affected by the benchmark indices, causing it to slip into the red.

The company's stock had recovered some of its losses, but the exact amount is not specified.

TCS' stock had a 15% drop from its 52-week high, which is a significant decline.

TCS' share buyback programme was subscribed over 7.52 times, with 30.11 crore shares tendered against the offer size of 4 crore shares.

The estimated acceptance ratio is 12%, which means that if you request 100 buyback shares, the corporation will consider around 12 shares for repurchase.

The TCS share buyback process is a significant event that attracts a lot of attention from investors. TCS' Rs 18,000-crore buyback was oversubscribed 7.52 times.

The TCS board will consider the proposal for buyback of shares at the meeting on October 11. This is a crucial step in the share buyback process.

In the past, TCS has undertaken buybacks with high acceptance ratios. The acceptance ratio for retail investors was 100 per cent in the 2020 buyback.

The TCS board will also consider and approve the earnings for the quarter and the six months ended September at the meeting on October 11. This is a routine process for the company.

The buyback is being done at Rs 4,500 per share, a 21 per cent premium to TCS' last close. This is a significant premium that investors are willing to pay.

TCS had cash reserves of Rs 73,993 crore in March 2020, which will be used for the buyback. This cash reserve will be utilized to repurchase shares from shareholders.

TCS share buyback has both advantages and disadvantages that investors should consider.

The advantages of TCS share buyback include reducing the number of shares traded in the open market, boosting investor confidence, and creating an excellent opportunity for short-term gains. Buybacks can also drive up the stock price and increase the Earnings Per Share (EPS) by reducing the number of outstanding shares.

Here are some key benefits of TCS share buyback:

However, there are also some disadvantages to consider, such as reduced cash reserves, decreased investment opportunities, and a potential perception of a lack of growth.

TCS buybacks offer several advantages that benefit both the company and its shareholders. By repurchasing its shares, TCS can signal to investors that it believes its stock is undervalued, leading to an increase in shareholder confidence and potentially a higher stock price.

One of the key benefits of buybacks is the efficient use of surplus cash. TCS can return excess capital to shareholders through a buyback, rather than keeping large cash reserves and earning minimal returns. This approach can be a more effective way to utilize excess cash.

Buybacks can also lead to an upsurge in Earnings Per Share (EPS). By reducing the number of outstanding shares, TCS can increase its EPS, which is a key metric for evaluating a company's financial performance. This can be particularly attractive to investors.

A buyback can also be a tax-efficient return of capital for shareholders. In many jurisdictions, capital gains taxes are lower than dividend tax rates, making buybacks a more attractive option. This can result in a higher net return for shareholders.

Here are some of the key advantages of TCS buybacks:

A buyback might not have a significant impact on the stock price due to TCS's massive size and market capitalization.

The buyback could lead to a short-term profit, but investors might miss out on long-term gains, as TCS is projecting strong growth in a high-demand environment.

An upswing in EPS may temporarily inflate share prices, creating an artificial market bubble.

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Reduced cash reserves can limit a company's financial flexibility for future investments or unforeseen circumstances.

Buybacks can divert funds from investments in research and development, expansion into new markets, or innovation initiatives.

Investors might perceive buybacks as a sign of a company lacking better growth opportunities or inefficient capital utilization, impacting investor confidence.

Buybacks can artificially expand EPS by reducing the total number of outstanding shares, which doesn't necessarily reflect an improvement in the company's underlying financial performance.

Buybacks may be subject to taxation, potentially reducing overall returns for shareholders.

The capital used for buybacks could have been deployed elsewhere, such as in dividends, debt reduction, or strategic investments, potentially generating better returns for shareholders in the long run.

Here are some potential disadvantages of a TCS buyback:

The share buyback details are crucial for investors to understand the process and potential returns. TCS plans to buy back 4 crore shares at Rs 4,500 per share, a 28% premium to the Friday closing price.

The buyback process is expected to be completed within 90 days from the start of trade. The cost of purchase will be Rs 3,735 per share based on the BSE close price on February 14, 2022.

TCS will buy back up to 44 shares for a retail investor with a cap of Rs 200,000. The amount invested will be Rs 164,340. The buyback process will be completed within 2-3 months, assuming a 90-day timeline.

The buyback ratio has been fixed at 40%, 50%, 70%, and 100% for different scenarios. The number of shares accepted will be 18, 22, 31, and 44, respectively.

Here's a breakdown of the scenarios:

The profit per share will be Rs 765, and the profit will be Rs 13,464, Rs 16,830, Rs 23,562, and Rs 33,660, respectively. The % return on investment will be 8.19%, 10.24%, 14.34%, and 20.48%, respectively.

The breakeven cushion will be Rs 510, Rs 765, and Rs 1,785 for different scenarios. The breakeven price will be Rs 3,225, Rs 2,970, and Rs 1,950 for different scenarios.