TCS board approves share buyback of up to Rs 16,000 crore

TCS shares rallies as much as 2.90% after the announcement.India’s largest software services firm Tata Consultancy Services (TCS) approved a proposal to buy back shares at its board meeting on Friday.

“...the Board of Directors of the company ... has approved a proposal to buyback up to 7,61,90,476 Equity Shares of the Company for an aggregate amount not exceeding ~Rs16,000 crore,” TCS said in a BSE filing on Friday afternoon.

TCS shares rallies as much as 2.90% after the announcement.

During its Q4 FY2018 earnings call, TCS CEO Rajesh Gopinathan had said the company’s intention is “to keep capital return close to 80-100% of annual free cash flow”.

Last year, TCS had undertaken a Rs 16,000-crore mega buyback offer, entailing 5.61 crore shares at a price of Rs 2,850 per equity share.

The buyback process had seen Tata Sons tendering over 3.60 crore shares, accounting for 64.2% of the total shares bought back by the company. Other large investors who participated in the buyback were Government of Singapore, Copthall Mauritius Investments Ltd and EuroPacific Growth Fund.

For financial year 2018, TCS returned Rs 26,800 crore to shareholders in both dividends and the buyback. For the full year, TCS’s net cash from operations amounted to Rs 28,160 crore and free cash flow was Rs 26,360 crore.

Share buybacks typically improve earnings per share and return surplus cash to shareholders, while also supporting share price during period of sluggish market condition.

Indian IT companies have been under pressure to return excess cash on their books to shareholders through generous dividends and buybacks. Many IT firms, including Infosys (Rs 13,000 crore) and HCL Technologies (Rs 3,500 crore) had undertaken buyback schemes last year.