TCS Buyback 2022: January 12, 2022 was a notable day for the Indian IT industry. Three Indian giant IT companies announced their Q3 FY22 results on that day, thus kick starting the earnings season with a bang! One of the three companies was Tata Consultancy Services (TCS) Limited, the Technology arm of the Tata Group.
Along with announcing its results, the company also declared an interim dividend and a buyback of its shares. The stock rose after the results and these two events were declared. So let’s discuss more about this eventful day specifically for the Tata Consultancy Services shareholders.
TCS Buyback 2022- TCS has now announced that the buyback will be open between March 9th and March 23rd 2022.
About the company
Tata Consultancy Services is the flagship company and a part of Tata group. It is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 50 years. TCS offers a consulting-led, cognitive powered, integrated portfolio of business, technology and engineering services and solutions.
Tata Consultancy Services Q3 results
Tata Consultancy Services Limited reported revenues at ₹48,885 crores, up 16.3% YoY. The operating margin stood at 25%, while the net margin was at 20%. Net income was ₹9769 crores for the quarter. During the quarter, the company added 10 new $100 million+ clients and 21 new $50 million+ clients. Net cash from operations stood at ₹10,853 crores, it was 111% of net income.
The company had workforce strength of 556,986 employees, with new additions of 28,238 employees. The employee attrition rate stood at 15.3%. Along with the Q3 results, the company announced a dividend of ₹7/share and also recommended a buyback of its shares to the tune of ₹18,000 crores at ₹4500/share.
Some previous buybacks by the company
During the last four of five years, Tata Consultancy Services has announced a buyback of its shares. This is TCS’s fourth buyback since 2017, and is the first for any company in the calendar year 2022. The company has approved share buybacks worth ₹16,000 crores each in 2017, 2018 and 2020.
The latest TCS Buyback Details
At its meeting on January 12, 2022, the board of directors of the company approved the proposal to buy back up to 4,00,00,000 equity shares of the company for an aggregate amount not exceeding ₹18,000 crores, being 1.08% of the total paid-up equity share capital, at TCS Buyback price ₹4500 per equity share. The buyback will be executed at a premium of around ₹600 from the current share price.
|Buyback Type||Tender Offer|
|TCS Buyback Offer||₹ 18,000 Cr|
|Date of Board Meeting approving the proposal||Jan 12, 2022|
|Date of Public Announcement||Jan 12, 2022|
|Buyback Number of Shares||4,00,00,000|
|TCS Buyback Price||₹ 4500 Per Equity Share|
The buyback will be carried on a proportionate basis under the tender offer route using the stock exchange mechanism. The buyback will be subject to approval of the shareholders by means of a special resolution through a postal ballot. As per the pre-buyback shareholding, the promoters of the company held 72.19% of the total shares.
What does this mean for investors?
Companies announce share buybacks if they wish to increase demand in the market. This helps in reducing the number of shares in circulation, which can increase the share value and the earnings per share (EPS) of the company.
When the EPS goes up, assuming the P/E remains constant, the stock price should also go up. A share buyback can also improve the company’s ROE.
Indian IT companies like TCS, Wipro, Infosys, and HCL Technologies have a lot of cash on their balance sheets, and hence buyback announcement from these companies are frequently made.
So this was all about the IT giant TCS. From its Q3 results to dividend and buyback, all happened in a single day. The Dalal Street participants gave a thumbs-up to the company’s stock the day after the results were announced. Also, the attrition rate of 15% was also the lowest in the industry. The same metric stood at 25% for Infosys. Meanwhile, the participation of women in the company’s workforce has also risen over the years.
TCS is a cash cow for the Tata Group. As a result, dividends and buyback have been frequently made by the company. In this way, the company rewards its shareholders while simultaneously being profitable. Because idle cash lying on the balance sheet of the company also has a cost. If it cannot be deployed in some profitable investment opportunity, rewarding shareholders makes sense as it gives them an indication that the company is generating cash while being profitable.