TCS board goes for share buyback; Rs 16,000 crore approved at Rs 2,850 per share
While share buybacks in itself isn't anything new, this is not a common phenomenon in the till recently fast growing IT services sector.
The board of members of TCS on Monday approved a proposal to buyback up to 5.61 per cent equity shares at a price not exceeding Rs 2,850, aggregating Rs 16,000 crore.
In a filing to BSE the company said the board members have approved buyback of "5,61,40,351 equity shares for an aggregate amount not exceeding Rs 16,000 crore (hereinafter referred to as the "Buyback Size") being 2.85 per cent of the total paid up equity share capital, at Rs. 2,850"
"The buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer route using the stock exchange mechanism in accordance with the provisions contained in the SEBI (Buy Back of Securities) Regulations, 1998 and the Companies Act, 2013 and rules made thereunder," the company said.
The announcement comes at a time when some Indian IT companies are caught in controversies regarding shareholders' concerns. The Tata Consultancy Services stock rose 4 per cent on Monday after its board of directors approved a proposal to buyback up to 5,61,40,351 equity shares of the company for an aggregate amount not exceeding Rs 16,000 crore.
The buyback size does not include any expenses incurred or to be incurred for the buyback like filing fees, advisory fees, public announcement publication expenses, printing and dispatch expenses, and other incidental and related expenses, the company said.
Earlier this month, IT services major Cognizant Technology Solutions Corp, announced that it would do share buybacks worth $3.4 billion over two years. The announcement came even as Infosys squashed speculations that it was considering a Rs 12,000 crore share buyback program.
While share buybacks in itself isn't anything new, this is not a common phenomenon in the till recently fast growing IT services sector. Most technology services companies enjoyed double-digit growth rates till recently. However, technological shifts and changes in buying patterns have meant that their growth prospects have dimmed considerably, with most of them recording barely double-digit growth. In the past, companies required large amounts of capital as they kept adding people and business. That isn't true anymore. Cognizant by implementing a buyback seems to be concurring with this assessment on growth prospects.