India's IT bellwether Tata Consultancy Services (TCS) could announce a share buyback along with its earnings for the first quarter ended June 30, 2023 for the current fiscal (Q1FY24), believe analysts at global brokerage Jefferies. The IT services giant will kickstart the largecap earnings season for the June quarter on July 12.

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Apart from the financial results, the board of TCS will also consider and approve an interim dividend for fiscal FY24. The IT services giant has also fixed July 20, 2023, as the record date for the purpose of the said interim dividend.

"We believe TCS could announce a buyback as well. Commentary around nature/tenure of deals, sales/deal cycles, pricing, vendor consolidation and attrition would garner attention. While positives should be taken with caution, negatives could raise concerns," Jefferies noted.

The foreign brokerage also sees risk of TCS rival Infosys lowering top end

of guidance by 100 basis points to 6 percent year-on-year cc (constant currency). Focus will be on guidance, demand outlook, leadership transitions, nature of deals and deal cycles, Jefferies said.

TCS buyback history

The last time, TCS came up with share buyback was in March last year. The buyback ran between March 9 and March 23, 2022, amounting to Rs 18,000 crore.

The IT services giant had offered to buy back up to 40 million shares of the company for an aggregate amount not exceeding Rs 18,000 crore, or 1.08 percent of the total paid up equity share capital, at Rs 4,500 per share. The share buyback had seen record participation from investors surpassing the previous record made in 2020.

In 2020, TCS announced a share buyback programme of up to Rs 16,000 crore, which commenced on December 18 and closed on January 1, 2021.

TCS shareholders had approved a proposal to buy back up to 5,33,33,333 equity shares of the company at ₹3,000 per scrip for an aggregate amount not exceeding Rs 16,000 crore.

In 2018 and 2017, TCS had done two share buybacks worth Rs 16,000 crore each. In 2018, TCS bought back the shares at Rs 2,100 per share, while in 2017, the price was Rs 2,850 per share.

A share buyback, also known as share repurchase, is a corporate action where a company buys back its own shares from its shareholders usually at a premium to the prevailing market price. It can be an alternative tax-efficient way to return money to shareholders. Share buybacks reduce the number of shares in circulation, which can increase the share value and the earnings per share (EPS).

Shares of TCS have been flat so far this year, and have risen by 1.14 percent in the last one year amid IT stocks' underperformance as compared to about 22 percent rise in benchmark BSE Sensex during the period.

TCS is the largest IT company in India and also one of the world's largest providers of IT services.

(Edited by : C H Unnikrishnan)

First Published:Jul 3, 2023 3:45 PM IST