TCS Announces ₹17,000 Crore Share Buyback at ₹4,150 Per Share

Tata Consultancy Services made an important announcement on October 11, revealing their decision to conduct a share buyback worth ₹17,000 crore. Buyback price is set at ₹4,150 per share, which represents a premium of about 15% compared to the prevailing share price, this is the fifth time in the last six years that TCS has conducted a share buyback.

TCS plans to purchase up to 4,09,63,855 shares, which represent 1.12% of the total equity. Buyback size doesn't include transaction costs, applicable taxes, and other associated expenses. This move comes ahead of the company's earnings release, and on October 11, TCS stock closed at ₹3,543, on October 12.

TCS's History of Share Buybacks

TCS initiated its first share buyback in February 2017, where it bought shares worth Rs 16,000 crore at an 18% premium to the prevailing share price. This was followed by two more buybacks in June 2018 and October 2020, both at premiums of 18% and 10% respectively. Their most recent share buyback occurred in January 2022, offering a 17% premium and buying shares worth ₹18,000 crore. Now the current buyback price of ₹4,150 is lower than the previous buyback price of ₹4,500.

TCS emphasized that this buyback is subject to the approval of shareholders through a special resolution via a postal ballot. The specific details of the buyback process, timelines, and other necessary information will be released in due course, by Buyback Regulations.

TCS's Financial Performance in Q2 2023

In terms of financial performance, TCS reported a net profit of ₹11,342 crore in the September quarter, marking an 8.7% growth compared to ₹10,431 crore in the same period last year. Sequentially, the consolidated net profit increased by 2.4%, with a profit of ₹11,074 crore in the preceding June quarter.

Analyst Opinions

Despite missing revenue estimates, TCS outperformed profit expectations due to higher-than-expected margins. Analysts' opinions on TCS vary:

•    Jefferies India maintains a "Hold" rating with a revised price target of ₹3,690. They expressed concerns about a lack of recovery in sight.

•    Emkay Global Financial Services also maintains a "Hold" rating with a price target of ₹3,550, citing a mixed performance in Q2.

•    Motilal Oswal Financial Services remains positive on TCS with a target price of ₹4,060, highlighting TCS's strong position to withstand economic challenges.

•    HDFC Securities Ltd provides a target price of ₹3,800 based on earnings estimates, acknowledging the contrast between strong deal wins and growth deceleration.

Interim Dividend Announcement

In addition to the share buyback, TCS's board of directors announced a second interim dividend of ₹9 per equity share on October 11, 2023. This decision is a reward to the company's shareholders. The second interim dividend will be paid on November 7, 2023, to the eligible shareholders as of the Record Date on October 19, 2023.

Stock Performance

In the last month, the share price of TCS remained stable with a slight 0.70% decrease, Over the past six months, the stock has given an 11% return to its investors. In a one-year time frame, TCS has given 14% return, However, when examining five years TCS  has given an 85% return, making it a notable long-term investment.