TCS Buyback 2022

About the Company - Tata Consultancy Services Limited (TCS)

Tata Consultancy Services Limited (TCS) is engaged in providing information technology (IT) services, digital and business solutions. The Company’s segments include banking, finance and insurance services (BFSI); manufacturing; retail and consumer packaged goods (CPG); telecom, media and entertainment, and others, such as energy, resources and utilities, hi-tech, life science and healthcare, s-Governance, travel, transportation and hospitality, and other products. Its services portfolio consists of IT and assurance services, business intelligence and performance management, business process services, cloud services, connected marketing solutions, consulting, engineering and industrial services, enterprise solutions, IT infrastructure services, mobility products and services and platform solutions. Its software offerings include Digital Software and Solutions, TCS BaNCS and TCS MasterCraft, among others. It serves industries, including insurance, healthcare, retail, telecom and others.

TCS Buyback 2022

What is a Buyback of Shares?

During a buyback, a company repurchases its shares from existing shareholders, usually at a price higher than the prevailing market rate. As a result, the number of shares outstanding in the market reduces.

KEY HIGHLIGHTS OF BUYBACK

Buyback Type	Tender Offer
Date of Board Meeting approving the proposal	12th January 2022
Date of Public Announcement	12th January 2022
Buyback Offer Amount	₹ 18,000 crores
Buyback Number of Shares	4 crores Equity Share
Buyback Price	₹ 4500 Per Equity Share

Details of Buyback:

Further to our intimation dated January 7, 2022 and in terms of Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, we wish to inform you that the Board of Directors of the Company at its meeting held today has approved a proposal to buyback up to 4,00,00,000 (Four crore) Equity Shares of the Company for an aggregate amount not exceeding ₹18,000 crore (Rupees eighteen thousand crore only) (hereinafter referred to as the "Buyback Size") being 1.08% of the total paid-up equity share capital, at ₹4,500 (Rupees four thousand five hundred only) per Equity Share (hereinafter referred to as the "Buyback Price").

How to Participate in buyback?

• Firstly, to be eligible for the buyback the investor should have shares of Tata Consultancy Services Limited (TCS) in his/her demat account as on record date [23.02.2022]

• Once you have shares in demat, you can participate in the buyback process which is opening from [09.03.2022], by selling your shares through your broker on NSE or BSE.

• The shares will be Debited from your demat account on [23.03.2022] based on the acceptance ratio.

• Then on [01.04.2022] the payment will be given to you in your respective bank account for accepted shares and unaccepted shares will be returned to your demat account.

Important Definitions:

• Acceptance Ratio: Acceptance ratio depends upon the buyback size and the quantity tendered in the buyback. The ratio can be different across different categories – Retail and Non Retail. If in a category, the total buyback tendered quantity exceeds the buyback size, the acceptance ratio will be lesser and if the buyback tendered quantity is less than the buyback size then the acceptance ratio will be 100%.

• Record Date: The issuing company fixes a particular date when the investor must own shares in order to be eligible to participate in corporate events like buyback of shares, receiving dividend, bonus shares etc. This is called record date. By this date, the company identifies its shareholders and sends them dividends, bonus shares or notice for AGMs etc., as the case may be

• Tender Offer: Shareholders will have the option to submit (or tender) a portion or all of their shares Within a certain time frame and at a premium to the current market price, this premium compensates investors for tendering their shares rather than holding on to them.

• Market Offer: Companies buyback shares in the open market over an extended period of time.

Pre-Buyback Shareholding Pattern of the Company as on January 7, 2022:

Particulars	No of Shareholders	No of Shares	% of Shares
Promoter Companies	9.00	2,67,02,04,298.00	72.19
Indian Financial Institutions / Banks / MF / Insurance Companies	460.00	28,83,74,333.00	7.80
FIIs/FPIs/NRIs/Foreign National and OCB	34,750.00	56,33,00,352.00	15.23
Resident Individuals and others	15,72,915.00	14,35,20,206.00	3.88
Clearing Members	311.00	5,42,300.00	0.01
Bodies corporate/LLP/Trust/NBFC	6,291.00	3,31,09,884.00	0.90
Grand Total	16,14,736.00	3,69,90,51,373.00	100.00

Expected Buyback Gains Calculation:

Max Amount for Retail Investors (A)	₹ 2,00,000.00
Buyback Price (B)	₹ 4,500.00
No of Shares Retail Investor can Buy [A/B]	44.00
Market Price of TCS on 12.01.2022	₹ 3,858.00
Profit per share if Purchased on above rate	₹ 642.00

	Case I	Case II	Case III	Case IV
Acceptance Ratio	50%	60%	70%	80%
Shares Accepted	22.00	26.00	30.00	35.00
Balance Shares	22.00	18.00	14.00	9.00
Expected Profits	₹ 14,124.00	₹ 16,692.00	₹ 19,260.00	₹ 22,470.00

 

Conclusion:

In my view, a company that opts for buy-back of shares is either trying to compensate the shareholders from the available surplus or it may be willing to consolidate its own position as it expects improved performance in the coming periods. It could also be for both reasons. In reality, I am not affected by their reason as long as the price offered is at a better premium than the ruling price. This will motivate me to stay put with my holdings and or induce me to initiate a new trade. Thus the buyback offer of TCS seems to be attractive and one should consider it for short term returns of around 10-15%.

This are my personal views, all the equity investments are subject to market risk. Please read all offer documents before investing. This blog is only for information and education purposes. Please consult your investment adviser before investing.

Thank You for Reading this Article.

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