TCS buyback: IT bellwether Tata Consultancy Services (TCS) informed bourses on Friday, October 6, that its board will consider a proposal for the buyback of equity shares of the company at its meeting to be held on October 11, 2023. Before this, TCS announced the buyback of its shares in January 2022. The buyback size was Rs 18,000 crore. Shares of the company today ended at Rs 3,620.20, up 0.87 per cent on the BSE.

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The company will also announce its Q2 FY24 results on the same day.

It has been a rollercoaster ride for IT stocks for around two years. The stocks took a heavy beating amid tough global macros but saw some smart recovery earlier this year. Lately, a number of global brokerages, too, have turned positive on the sector; however, full recovery still seems a distant thing for now. 

Last week, IT services giant Accenture forecast full-year earnings and first-quarter revenue below Wall Street targets, signalling that high inflation and interest rates would choke enterprise spending through next year.

The prospect of higher-for-longer borrowing rates is forcing businesses to rethink their digitisation plans and technology budgets, hurting companies like Accenture that offer IT services ranging from strategy consulting to cloud migration, according to a Reuters report.

Given this scenario, the buyback measure seems a wise decision for the company. Buybacks are generally done to increase the equity value of the company and make it more financially attractive.

In the past one year, the stock of the TCS has risen over 18 per cent.

IDBI Capital forecasts 0.5 per cent QoQ revenue growth for TCS in constant currency terms and a cross-currency tailwind of 10 basis points (bps) for the September 2023 quarter (Q2FY24).

The brokerage said it would watch for:

1) Strategy of the new CEO to drive growth;
2) TCV of deal wins;
3) Deal pipeline conversion trend;
4) hiring and offshoring,
5) outlook on EBIT margin and its sustainability;
6) commentary on long-term digital trends;
7) trends in generative AI;
8) Banking, US, and European outlook
9) trend in cost-take-out deals; and
10) When the tide is expected to turn