Tata Consultancy Services is considering a share buyback and will discuss the matter at a board meeting on February 20, the company told the Bombay Stock Exchange in a filing. If implemented, the company will follow other information technology companies such as Infosys or Cognizant in considering or announcing buybacks to ease investor concerns, The Economic Times reported.
As of December, TCS had over Rs 43,100 crore in cash and investments, representing nearly 9% of its market capitalisation (market capitalisation is the value of a company calculated by multiplying the total number of shares by the present share price). News of the possible move also boosted the company’s stock, with its shares trading at 1.50% up at Rs 2,450.00 (as of 12.27 pm).
IDBI Capital Markets and Securities executive Urmil Shah said the copmany could buy back a maximum of Rs 20,900 crore. “We believe that it would be reasonable for TCS to announce a share buyback of Rs 13,600 crore, which would be 2.9% of its market capitalisation,” Shah said.
Analysts also said that companies considering a buyback would “trigger a new trend”. Quant Broking Chief Executive Officer Sandeep Tandon said the move would also help increase the earnings-per-share of a company. “This is a good move. This has been a common practice in the United States,” Tandon said. Similarly, Quantum Securities Director Sanjay Dutt said the managements of of IT companies were “finally waking up to fact that if you have cash on the books with no alternative use, it is high time you give back money to shareholders”, Moneycontrol reported.
While Infosys has dismissed rumours that it is considering a buyback worth Rs 12,000 crore, Cognizant on February 8 said it would return $3.4 billion (approximately Rs 22,762.15 crore) to shareholders through dividends and share buybacks over the next two years.