TCS Board clears `16,000 cr share buyback; biggest in India

TCS Board clears `16,000 cr share buyback; biggest in India

FPJ BureauUpdated: Thursday, May 30, 2019, 09:05 AM IST
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If successful, it will surpass Reliance Industries’ 2012 share repurchase of `10,400 crore

New Delhi : Tata Consultancy Services Ltd (TCS) on Monday announced Rs 16,000 crore share buyback — biggest in the Indian capital market, as it looks to return surplus cash to shareholders.

 The decision comes at a time when India’s largest software services provider is under pressure of losing revenue from its clients in the US, which accounts for 65 per cent of the USD 155 billion industry, under President Donald Trump’s protectionist measures.

 TCS said in a stock exchange filing that its board approved buyback of up to 5.61 crore shares, or 2.85 per cent of its share capital, at Rs 2,850 apiece.

 The share buyback, if successful, it will be India’s biggest, surpassing Reliance Industries’ 2012 share repurchase of Rs 10,400 crore. TCS shares rallied 4.08 per cent to close at Rs 2,506.50 on the BSE, the highest closing price in five months.

 “TCS Board of Directors has approved a proposal to buyback up to 5.61 crore equity shares of the company for an aggregate amount not exceeding Rs 16,000 crore,” the company said in the filing. The board meeting is the last for N Chandrasekaran as TCS chief executive before he takes over as chairman of parent Tata Sons Ltd, which controls 73.3 per cent of the software developer, on Tuesday. TCS has a cash pile of Rs 43,169 crore, which is nearly 10 per cent of the company’s market capitalisation.  Share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting share price during periods of sluggish market condition.

Infosys too is being pressed with a demand for share buyback. Infosys is amid a bitter spat between a clutch of high-profile founders and the management primarily over utilisation of cash surplus for enhancing shareholder value rather than paying hefty pay hikes to the chief executive and severance package to departing employees. Infosys’ former CFO V Balakrishnan had demanded share buyback to protect shareholders’ interest. Infosys, which is India’s second largest software services firm, is sitting on a cash pile of Rs 35,697 crore or USD 5.25 billion (as on December 31, 2016). Balakrishnan, along with former colleague TV Mohandas Pai, had sought a USD 1.8 billion buyback in 2014 as well, just as its CEO Vishal Sikka was taking over. TCS said the buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer route using the stock exchange mechanism.

The buyback is subject to approval of the members by means of a special resolution through a postal ballot, it said.

The public announcement setting out the process, timelines and other requisite details will be released in due course in accordance with the Buyback Regulations.

TCS’ outgoing chief N Chandrasekaran had said that the company had received suggestions from investors over the need for certainty on dividend policy along with share buyback to distribute the cash.

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