TCS concludes Rs 18,000-cr buyback; Tata Sons could rake in Rs 13k cr

Over 301 million shares tendered in buyback-8.5 times the company intended to repurchase. Attractive buyback price lured investors into tendering their shares, say experts

Tata Consultancy Services (TCS) on Wednesday concluded its Rs 18,000-crore share repurchase programme–its fourth since 2017. Promoter Tata Sons, which owns 72.19 per cent stake in TCS, is likely to pocket nearly Rs 13,000 crore from the buyback.

According to data provided by stock exchanges, over 301 million shares were tendered in the buyback–8.5 times the company intended to repurchase. Attractive buyback price lured investors into tendering their shares, said experts. The buyback was done at Rs 4,500 per share, a premium of over 21 per cent to TCS’ last closing price of Rs 3,708.

TCS had set February 23 as the record date for determining the eligibility of shareholders.  The acceptance ratio –number of shares accepted out of total number of shares held–for the buyback will be determined as per the shareholding on this cut-off date.

As per analysis done by Edelweiss says the acceptance ratio for retail investors (those holding shares worth less than Rs 200,000) will be 14.3 per cent (One for every seven shares held on the record date). Meanwhile, the general acceptance ratio will be just 0.93 per cent (one for every 108 shares held). If any eligible shareholder doesn’t tender shares, those shares will be allotted to shareholders who tendered extra (oversubscribed portion) on a proportionate basis.

The acceptance ratio for the latest buyback is far less than previous buybacks.

“In the previous three buybacks, retail category acceptance has been 100 per cent but now with an attractive spread and massive increase in demat accounts additions in the past one year, we continue to believe the acceptance to be far lower,” said Abhilash Pagaria, head, Edelweiss Alternative Research.

Since 2017, TCS has bought back shares worth Rs 66,000 crore. Shares bought back under such repurchase programmes are extinguished, which improves the company’s return ratios.

Tata Sons board meeting today

Tata Sons, the holding company of the Tata group, is scheduled to hold a day-long board meeting on Thursday. This will be the first physical board meeting for Tata Sons since the Covid outbreak, according to a source. The board is expected to take a call on the capital allocation for the next financial year after it raised Rs 13,000 crore by participating in TCS’ share buyback. Tata Sons plans to use the proceeds to repay part of Tata Teleservices debt and infuse funds in the group's real estate and infrastructure business.