India's largest software exporter Tata Consultancy Services (TCS) on Tuesday, November 28, announced that its ₹17,000 crore share buyback program will open on December 1 and close on December 7.

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The information technology bellwether will repurchase up to 4.09 crore shares (1.12% of the total equity share capital) at ₹4,150 apiece in a buyback valued at ₹17,000 crore.

For small shareholders, the entitlement ratio has been fixed at one equity share for every six equity shares held on the record date, while for all other eligible shareholders, the entitlement ratio stands at two shares for every 209 shares owned.

“The company believes that the buyback is not likely to cause any material impact on the profitability or earnings of the company except to the extent of reduction in the amount available for investment, which the company could have otherwise deployed towards generating investment income,” TCS said in a regulatory filing.

"The company believes that the buyback will not impact the growth opportunities of the company," it added.

Tata Sons Private Limited intends to tender 2,96,03,690 equity shares and Tata Investment Corporation Limited intends to tender 11,358 shares. The total buyback size is 4,09,63,855 shares.

Assuming the response to the buyback is to the extent of 100% from all the shareholders up to their entitlement, the aggregate shareholding of the promoters will increase to 72.41% as against 72.3% now.

TCS had fixed November 25 as the record date for its fifth share buyback in six years. The record date is the cut-off date established by a company to determine which shareholders are eligible to participate in the buyback.

Prashanth Tapse of Mehta Equities had recommended short term trades to buy TCS before the record date and use the opportunity to generate decent returns based on assumed entitlement ratio. "Based on buyback rate of ₹4,150, short term investors can generate 18% ROI based on today’s price at ₹3,519. In addition, investors would also take benefits of tax as the income generated from this buyback of shares is tax exempted. We advise investors to buy 48 shares (₹200,000/4150) to get maximum entitlement under ₹200,000 retail category."

TCS had previously conducted a share buyback last year when it repurchased shares at ₹4,500 apiece in a buyback valued at ₹18,000 crore. Its three earlier buybacks in 2020, 2018, and 2017 were worth ₹16,000 crore each. All the previous four buybacks were carried out via the tender offer route. A tender offer buyback is one where the company repurchases shares from existing shareholders at a fixed price.

Shares of TCS were trading 0.43% higher at ₹3,472.05 apiece on the NSE during Tuesday's late afternoon trade. The scrip has gained nearly 6% since the beginning of this year as against a 9% rise in the Nifty50 index.

First Published:Nov 28, 2023 3:17 PM IST