TCS share price in focus as buyback opens today; should you tender your shares?

Tata Consultancy Services (TCS) share price will be in focus on Friday as the company’s share buyback programme opens today. TCS share buyback worth ₹17,000 crore will begin on December 1 and close on December 7. 

This will be the fifth share buyback from India’s largest IT services company.

TCS will buy back nearly 4.2 crore equity shares or 1.1% of the outstanding equity through a tender offer route. The company has set the buyback price at ₹4,150, which is over 18% higher from Thursday’s closing price of ₹3,493.40 on the BSE. 

The record date for TCS buyback was November 25.

Small shareholders, which are categorized as those with investments totaling less than ₹2 lakh, have been assigned an entitlement ratio of 1 equity share for every 6 shares held as of the record date. This ratio corresponds to approximately 17%.

Read here: TCS announces share buyback dates, fixes retail entitlement ratio at 17%; Details here

For other qualifying shareholders, the entitlement ratio is set at 2 shares for every 209 shares held.

If all shareholders exercise their buyback entitlement to the full extent, the promoters’ combined shareholding will rise to 72.41%, up from the current 72.3%.

Tata Sons and Tata Investment Corporation, two holding companies within the Tata Group, have indicated their intention to take part in the buyback, potentially tendering a combined maximum of 2,96,15,048 equity shares. 

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Should investors tender shares in TCS buyback?

Analysts believe short term investors could tender their TCS shares in the buyback to take the benefit of the premium buyback price. However, analysts are bullish on the stock for the long term given the company’s strong fundamentals.

“Short term traders can use the opportunity to generate decent returns based on assumed entitlement ratio. In addition, investors would also take benefits of tax as the income generated from this buyback of shares is tax exempted. In the long term we continue to be optimistic on the IT sector wherein TCS and Infosys would remain investors' favourite counter to hold,” said Prashanth Tapse, Sr VP Research at Mehta Equities Ltd.

Also Read: TCS buyback 2023: Should you tender your shares?

Sonam Srivastava, Founder & Fund Manager at Wright Research also suggests investors to tender shares for short term gains.

“The company's consistent performance, indicated by an 8.7% YoY rise in net profit, suggests a stable outlook. However, the stock has experienced a slight decline in value recently. If you're considering short-term gains, tendering your shares could be beneficial due to the premium buyback price. For long-term investors, it's essential to weigh this against the potential future growth of the company and the IT sector. The buyback reflects confidence from the management, which might bode well for the company's future,” Srivastava said.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.