TCS announcing another buyback on January 12. 4th since 2017.

TCS has informed that it would be considering buyback of it’s shares on January 12, 2021 along with the 3rd quarter results.

Key points to note –

  • Other than the general intimation that the board will consider buyback on January 12th, the Company has not provided any further details.
  • This is the 4th buyback that the Company would be announcing. Details of the previous buybacks are –
    • February 2017 – Rs 16,000 crore @ Rs 2850/ share i.e., 2.85% of the paid up capital. Adjusting for subsequent bonus in June 2018, the prevailing stock price at the time of 2017 buyback announcement was about Rs 2400/ share i.e., about 20% discount to the buyback price.
    • June 2018 – Rs 16,000 crore @ Rs 2100/ share i.e., 1.99% of the paid up capital. This was at 14% premium to the then prevailing price of Rs 1840/ share.
    • October 2020 – Rs 16,000 crore @ Rs 3000/ share i.e., 1.42% of the paid up capital. This was at 11% premium to the then prevailing price of Rs 2700/ share.
  • At the end of the September 2021 quarter, the Company had cash and cash equivalents of Rs 51,950 crore.

Given the past track of buybacks, general expectation would be buyback of the same Rs 16,000 crore at a minimum premium of 10% to the current prevailing price of Rs 3850/ share i.e., about Rs 4,200 – Rs 4,300/ share. This would imply buyback of about 1% of the paid up capital.

Update on actual announced buyback on January 12th

  • Buyback Price Rs 4,500/ share i.e., 16.6% premium to the last closing price.
  • Buyback amount Rs 18,000 crore
  • 1.08% of paid-up capital

On all parameters, TCS has announced a better buyback than I had expected.

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