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The buyback will be conducted through the tender offer route
Tata Consultancy Services , India's largest IT services company, has come out with a buyback offer for its shareholders. The plan is to purchase nearly 4.09 crore shares for a total consideration amount of Rs 17,000 crore.
The price at which buyback will be made - Rs 4,150 per share, is at a 15 per cent premium as compared to the market closing as of Oct 11, 2023.
The company will conduct the buyback through a tender offer route, wherein existing shareholders may opt to retain or sell the shares of the company.
The company's fifth buyback in the last six years
This is not the first time that TCS has rewarded its shareholders through the buyback route. In the last six years, TCS has conducted four other buybacks, too. The total buyback amount this time will represent 1.12 per cent of the total paid-up share capital of the company. The management of the company has stated that the buyback is being conducted to keep in line with their shareholders' capital allocation-friendly policy. Post buyback, the promoters' stake in the company will also increase marginally.
TCS' previous buybacks in recent years
| Year | Amount spent on buyback (Rs cr) | Number of shares bought back (in cr) |
|---|---|---|
| 2022 | 18000 | 4 |
| 2020 | 16000 | 5.3 |
| 2018 | 16000 | 7.6 |
| 2017 | 16000 | 5.6 |
What it means for investors
A buyback is when a company purchases its own shares from the market and extinguishes them. Buybacks are done for a variety of reasons, such as reducing the number of shares outstanding, consolidating promoters' stake, improving earnings per share, and is also a tax-effective way of rewarding the shareholders. Since the buyback price is at a premium to its current market price, it also offers a good exit opportunity for investors.
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