India’s biggest IT services company TCS has announced 18 August, 2018, as the record date for buyback of shares. TCS shareholders will be able to participate in the buyback, if they holds shares in their demat accounts as on the record date. This announcement was made on Saturday. TCS shares closed on a flat note today, falling 0.07% on the BSE to ₹ 1,976. In comparison, the Sensex ended 0.36% higher today. A buyback is a mechanism through which a company repurchases a specific amount of its outstanding shares. Buybacks help to improve the earnings per share and return on equity.
Here are 5 things to know about TCS’s buyback offer:
1) In June, the TCS board had approved a proposal to buy back up to 7.61 crore shares, or 1.99% of the total paid-up equity share capital, at ₹ 2,100 a share.
2) The ₹ 16,000 crore buyback is broadly in line with TCS management’s intention of pay out 80-100% of the company’s free cash flow to shareholders. Last year, too, TCS had undertaken a buyback offer of a similar size.
3) TCS had earlier said that its promoters intend to participate in the buyback offer. “We would like to inform you that the promoter and promoter group of the company have communicated their intention to participate in the proposed buyback," TCS had said in a BSE filing.
4) The buyback will take place through the tender route, in which TCS will accept shares on a proportionate basis during the buyback period.
5) According to Sebi’s mandate, companies have to reserve 15% of any buyback for small shareholders with holdings of less than ₹ 2 lakh. This will increase the acceptance ratio for TCS’ retail investors who want to participate in the buyback offer.