On Saturday, IT giant Tata Consultancy Services (TCS) announced that the company had fixed Wednesday, February 23, 2022, as the record date to determine the entitlement and the names of the equity shareholders who would be eligible to participate in the company’s share buyback.
While announcing its third-quarter gains last month, TCS had revealed an up to Rs18,000 crore buyback offer entailing 40 million equity shares at Rs 4,500 apiece, which is at a premium of around 20.15 per cent to the current market price of around Rs 3,733.75.
TCS promoters--Tata Sons and Tata Investment Corporation--intend to participate in the buyback offer by tending about 28.8 million shares.
“This is further to our letter dated January 12, 2022, informing the decision of the board of directors of the company to buy back up to 4,00,00,000 fully paid-up equity shares of the face value of Re 1 each at Rs 4,500 per equity share for an aggregate amount not exceeding Rs 18,000 crores,” TCS had stated in a regulatory filing on February 12.
What’s For Retail Investors?
Retail investors who have shares worth Rs 2 lakh or less as on the record date will get reservation in the buyback offer to the extent of 15 per cent of the buyback size. Record date is the cut-off date by when the offer can be availed. This means if you own less than 51 TCS shares, you will get the benefit of the reservation at 15 per cent acceptance rate. Rs 2,700 crore would be the reservation for these shareholders (6 million shares at a price of Rs 4,500 per share).
Earlier Buybacks
This buyback offer comes more than a year after the company’s previous one (December 18, 2020 to January 1, 2021), which was worth about Rs 16,000 crore and group holding firm Tata Sons had tendered shares worth Rs 9,997.5 crore. Over 53.3 million equity shares were purchased at that time (offer price was Rs 3,000 per share), and out of the total sum, Tata Sons’ 3,33,25,118 shares were obtained under the buyback proposal.
In 2017 and 2018, TCS had prompted two buybacks, both of which were for an aggregate amount of Rs 16,000 crore. In 2018, TCS repurchased 76.1 million shares for Rs 2,100 per share, a 14 per cent premium to the stock price then.
In the last three buybacks, the acceptance ratio was 100 per cent. This means whoever wanted to encash their share at the buyback price got accepted. “Most small shareholders do not take part in such offers, which would result in a higher acceptance ratio. However, the theoretical retail entitlement ratio stands at 25-30 per cent,” stated a Sharekhan report.
Recent Earnings
In January 2022, TCS had declared its earnings for the quarter concluded December 2021. It registered a 12.2 per cent rise in its net gain to Rs 9,769 crore. Its revenue increased 16.3 per cent in the quarter under review to Rs 48,885 crore from Rs 42,015 crore in the fiscal period. The company has also revealed a dividend of Rs 7 per share.
