TCS buyback: Anil Singhvi explains math behind acceptance ratio, entitlement ratio; advises retail investors not to panic

Tata Consultancy Services (TCS) has approved a buyback of 4 crore shares at a price of Rs 4500 per share to the tune of Rs 18,000-crore. The IT behemoth buyback offer has begun today and it will close on March 23.  

As investors continue to remain confused about acceptance ratio and entitlement of buyback shares, Zee Business Managing Editor Anil Singhvi on Wednesday explained the math behind entitlement ratio. He also suggested retail investors to not to worry as TCS shares usually breach share buyback price within a period of year.  

See Zee Business Live TV Streaming Below:

Explaining the TCS buyback math, the Market Guru said one should not be confused with entitlement ratio and acceptance ratio. 

He said entitlement ratio is sort of guarantee of a minimum number of shares that a company accepts. However, one has to make sure that they tender all shares entitled in order to be part of buyback.  

Entitlement ratio is calculated based on number of shareholders in retail category on the record date divided by the price of the share on that day.  

#EntitlementRatio क्या है?
एंटाइटलमेंट रेश्यो से क्यों डरने की जरूरत नहीं?#Buyback में कितने एंटाइटल शेयर एक्सेप्ट होंगे?
कितने शेयर टेंडर करें?#TCS में क्यों चिंता करने की जरूरत नहीं?
1-2 साल में किस भाव तक आएगा TCS?

#TCSbuyback के जुड़े हर सवाल का जवाब @AnilSinghvi_ से pic.twitter.com/nY5EayKrt2

— Zee Business (@ZeeBusiness) March 9, 2022

"As per calculation, a retail investor can invest up to Rs 2lakh and the record date price of TCS was Rs 3564. When Rs 2lkah is divided by the record date price, the number of shares that comes out is 56, which means if you have 56 or less shares, you are part of the retail category. The acceptance ratio in the retail category is high due to a smaller number of shareholders in comparison to the general category," said Anil Singhvi.  

General category usually sees 4 to 5% acceptance ratio, while retail category has seen 100% acceptance in the last three buyback that the IT giant came with previously, said Singhvi.  

He said retail investors should not worry much as far as TCS price is concerned as traditionally, the shares of TCS have bounced back and traded above the buyback price within a year of the offer.  

"In 2017, TCS shares were trading 24% below its buyback price, but pulled back in 255 days, it began trading on its buyback price within 37 days after trading 6% lower in 2018. Similarly, in 2020, TCS share traded at discount of 12% in 2020, however, it swung back to trade around its buyback price within 36 days. Considering this data, TCS is very likely to trade at its buyback price of RS 4500 in a year. So, there is nothing to worry for retail investors," added the market guru.