Last month, the IT business announced an up to Rs. 18000 crore buyback offer, involving 4 crore equity shares at Rs. 4,500 each, as part of its third-quarter earnings announcement. TCS’s promoters, Tata Sons and Tata Investment Corporation Ltd, plan to present around 2.88 crore shares in the buyback offer.
“TCS fundamentals have never been stronger. TCS continues to generate free cash flows in geometric proportions, and the new buyback plan is music to the market’s ears – as it underlines management confidence,” said Sreeram Ramdas, analyst at Green Portfolio.
This is TCS’ fourth and largest stock buyback in the last five years. The latest TCS buyback, valued around $16,000 crore, began on December 18, 2020, and ended on January 1, 2024.
“The repurchase is coming at a premium of over 18 percent, and we’ve seen in the past that retail investors obtain over 70% acceptance when tendering their shares.” Overall, market players with a short-term vision may find this to be a favourable opportunity. “Long-term investors may maintain the company even though the valuations are high in comparison to their near peers,” Ramdas noted.
“Given the repurchase price is 22% higher than Friday’s closing price on February 11th, 2024, and it will have a high acceptance ratio, the TCS buyback might be a terrific opportunity for market players with a short-term perspective.”” “The prognosis for TCS remains robust, therefore long-term investors may continue to keep the company,” said Omkar Tanksale, Senior Research Analyst at Axis Securities.
“The TCS stock has already corrected dramatically in the recent month, providing traders and investors with an attractive risk-reward opportunity. We’ve seen acceptance rates of more than 70% for retail investors in prior buybacks, but this time it’s likely to be a little lower because the majority of retail investors are expected to participate. Despite short-term volatility, the prognosis for the industry and TCS is bright, thus investors should take advantage of this buyback,” said Santosh Meena, Head of Research, Swastika Investmart Ltd.
