The share price of Tata Consultancy Services (TCS) will be under focus on Friday, as the company's share repurchase program begins today. TCS's share repurchase programme will begin on December 1 and end on December 7.
TCS would repurchase almost 4.2 crore equity shares, or 1.1% of the outstanding stock, via a tender offer. The business has set the buyback price at 4,150, which is more than 18% higher than Thursday's BSE closing price of 3,493.40. The TCS buyback record date was November 25.
Small shareholders, defined as those with assets totaling less than Rs. 2 lakh, have been granted an entitlement ratio of one equity share for every six shares held on the record date. This proportion is roughly 17%.
The entitlement ratio for other eligible shareholders is fixed at 2 shares for every 209 shares held. If all shareholders fully exercise their buyback rights, the promoters' combined stake will increase to 72.41%, up from 72.3% now.
Tata Sons and Tata Investment Corporation, two Tata Group holding businesses, have signalled their intention to participate in the repurchase, potentially tendering a total of 2,96,15,048 equity shares.
Should investors participate in the TCS share buyback?
Analysts predict that short-term investors may tender their TCS shares in the buyback to gain from the higher buyback price. Analysts, on the other hand, are bullish on the stock in the long run due to the company's good fundamentals.
"Based on the assumed entitlement ratio, short-term traders can take advantage of the opportunity to generate decent returns." Furthermore, investors would benefit from tax breaks because the money generated by this share buyback is tax-free. Long term, we remain positive about the IT sector, with TCS and Infosys remaining investors' favourite counters to keep," said Prashanth Tapse, Sr VP Research at Mehta Equities Ltd. Sonam Srivastava, Founder & Fund Manager at Wright Research, advises investors to tender shares for short-term gains as well.
"The company's consistent performance, as evidenced by an 8.7% increase in net profit year on year, suggests a stable outlook." However, the stock's value has recently dropped slightly. If you're looking for short-term gains, tendering your shares may be advantageous due to the premium buyback price. Long-term investors must measure this against the company's and the IT sector's potential future growth. "The buyback reflects management's confidence, which may bode well for the company's future," Srivastava added.
