IT belwether Tata Consultancy Services has announced the dates of the mega Rs 18,000 crore buyback and the offer will open on March 9. The window closes on March 23. The tender offer will be made at a premium of 17 percent (as of the announced date) or Rs 4,500 per share.
Notably, this will be TCS’s fourth buyback and Tata Sons has been the largest beneficiary in the previous three buybacks.
Here’s everything you need to know about the buyback offer
TCS Share Repurchase: Who Can Offer TCS Shares for Redemption?
All investors who held shares in the company on February 23 can offer their shares in a specified proportion. For the repurchase, shareholders holding shares worth Rs 2 lakh or less in the retail category will be considered. While those who own stocks worth more than Rs 2 lakh will be considered under the general category.
TCS Shares Repurchase: How many shares of each class will the company repurchase?
TCS says it will repurchase 60,000,000 shares from the reserved class and 3.40,000 shares from the general class, in which all kinds of shareholders can participate.
TCS Share Repurchase: How Many Shares Can Be Offered?
That depends on the category you fall into. If you belong to the reserved category, the company will buy 14.61 percent of the total number of shares you own. That means TCS buys 1 share for every 7 you own. In the general category, the ratio is 1 share for every 108 shares.
TCS Share Repurchase: What Happens When You Have Two Demat Accounts?
You are required to offer shares separately from both demat accounts. The company uses PAN to determine the number of shareholders, therefore it will combine both applications and then calculate your entitlement ratio.
TCS Share Repurchase: How Do Investors Offer Shares?
Exchanges will, at the request of the company, provide a separate acquisition window to facilitate the placing of sell orders by eligible shareholders. You can contact your broker about how to access that window. Usually, each broker has a separate portal to access such corporate actions.
TCS Share Repurchase: Can Additional Shares Be Offered?
Investors may offer more shares than they are entitled to, and whether these additional shares will be accepted for redemption or not depends solely on the acceptance rate determined by the company. The share that is not accepted will be refunded to your Demat account by the RTA.
Investors whose shares are pledged are eligible for all the benefits of corporate action. However, they will have to redeem the shares before they can offer them for redemption.
TCS Share Repurchase: What’s the Goal?
The share buyback, or share buyback, is when a company buys back its own shares from investors or stakeholders. It can be seen as an alternative, tax-efficient way to return money to shareholders. Redemptions are fiscally attractive, even taking into account the 10 percent tax on long-term capital gains (LTCG).
Usually, companies go for share buybacks if they want to increase demand in the market. Share buybacks reduce the number of shares in circulation, which can increase share value and earnings per share (EPS).
When a company buys back shares, it results in a reduction in the number of shares outstanding and the capital base. To that extent, it improves the company’s EPS and ROE. When the EPS rises, assuming the P/E remains constant, the stock’s price should also rise.
Analysts say share buybacks typically improve earnings per share and return excess cash to shareholders, while also supporting the stock during sluggish market conditions.
Gaurav Garg, CapitalVia, said: “Despite the short-term volatility, the outlook for the sector and TCS is favorable so that investors can benefit from this buyback. Overall, market participants with short-term outlook may find this a favorable opportunity. keeping a long-term perspective can keep the stocks in mind for a long-term horizon.”
In 2021, TCS bought back more than 53 million shares at Rs 3,000 per share and 33.33 million shares were accepted under the offer. Also in 2017 and 2018, it undertook two buybacks and the size was about Rs 16,000 crore each. At the end of September 2021, TCS had cash and cash equivalents of Rs 51,950 crore.
The latest move comes after Tata Sons bought Air India from the government for Rs 18,000 crore. The company pays Rs 2,700 crore to the government and the rest goes towards paying off debts. Tata Sons currently owns a 72 percent stake in TCS.
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