IT major TCS is to start its Rs 18,000 crore-buyback of shares at a price of Rs 4,500 from March 9. This price is at a premium of around 22 per cent to the current market price of Rs 3,485. According to notification on its website, the buyback is open till March 23, 2022 and the buyback proceeds will be credited to investors by April 1. The company had announced the share buyback option in January and the record date for the same was February 23.
Share buyback refers to the process in which the company buys its own shares from existing investors. Typically, companies do this when they are cash surplus and this is seen as another way of rewarding investors apart from dividend distribution.
Who Are Eligible For The Buyback?
All investors who held shares of the company as on or before the record date (February 23, 2022) are eligible for this buyback offer. For the buyback the company has defined two categories: reserve category (for small investors) and general category. According to the buyback offer letter, investors who won 56 shares or less on record date can participate in the reserve category. As per company records, there are little more than 2.11 million investors holding more than 41 million shares.
How Many Shares Will TCS Buy Back?
The company will buy back 6 million shares from the reserved category and 34 million from the general category.
How Many Shares Can You Offer For Buyback?
For the retail category, a simple back-of-the-envelope calculation is that retail category shareholding is seven times the buyback target. So, the company will buy back one share from every seven shares held. This means the company will buy back 14 .6 per cent of the shares held.
How Can You Participate In The Tendering Process?
All the shareholders have been intimated by an email for the tendering process and buyback entitlement. For more details, investors can contact their share broker or else visit the link of its registrar for more details. The current buyback amounts to 27 per cent of the company’s Rs 66,985 crore cash balance and 17 per cent of net worth. In the last five years, this is the fourth buyback offer from the company. However, this is bigger than what was offered in the past. In February 2017, the company came up with a buyback offer of Rs 16,000 crore, with an offer price of Rs 2,850. This was a 21.8 per cent premium to the market price then. Similarly, in June 2018 and November 2020, it came up with buyback offers with a premium of 20.5 per cent and 18.9 per cent, respectively, to the respective market prices at that point.
