TCS buyback offer ends today; what should retail investors do? Experts' take

TCS buyback offer has been drawing good response from investors on the last day of the offer. The Rs 18000-crore offer was subscribed more 7 times around 1.10 pm on Wednesday. Against 4 crore shares, TCS buyback saw 29.35 crore shares being tendered around the same time. TCS tends to buy 4 crore shares (1.1% stake) at the rate of f Rs 4500 per equity share.  

At current market price of around Rs 3700 per share, TCS buyback offers nearly 22% premium. For reserved shareholders, the ratio of the buyback is 1 share for every 7 shares held and for general category, it is 1 for every 108 shares held, says Manoj Dalmia, founder and director, Proficient equities Private limited.   

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As the buyback offer of IT behemoth ends today, market experts are of the view that retail investors should tender their shares and also keep them for long-term due to uying interest in IT shares amid geopolitical uncertainties.  

Manoj Dalmia, founder and director, Proficient equities Private limited 

A premium of the offer price compared to the current market price was not so much when the buy-back was announced. The offer seems to be better due to the recent correction in the market Investors can take advantage of this by buying shares from the markets and tendering them in the buyback offer. 

Santosh Meena, Head of Research, Swastika Investmart Ltd.    

Based on the current overwhelming response towards buyback from the retail shareholder, approx. acceptance ratio will be between 14% and 15%. Short-term investors must grab this opportunity and tender their shares. Even the long-term shareholders should tender their shares as the buyback is tax-free," said Meena   

He suggested long-term shareholders to repurchase the tendered shares from the open market. For the non-tendered shares, investors can hold the shares because of the strong fundamentals of the company and strong tailwinds in the IT Sector.  

Ravi Singh, vice President and Head of Research, Share india 

TCS offers twin benefits to it’s investors, first in terms of attractive valuations and secondly a leader in the IT industry. The overall sector has a positive outlook in long-term well supported by a depreciating rupee which make most of the revenues from the overseas market. We recommend for short-term investors also to consider the buyback due to high acceptance ratio from a historical perspective. 

Ravi Singhal, Vice Chairman, GCL securities Limited 

As we believe it should be, one share for every six will go in buy back. Long-term investors should hold this stock for TGT 4400 in the next six months. 

Anuj Gaur, Director, IBBM (MM Securities)  

The estimated acceptance ratio is 12%, which indicates that if you request 100 buyback shares, the corporation will consider around 12 shares for repurchase at the $4,500 buyback price. 

This is the fourth buyback offer by TCS. If retailers have shares on or before the record date, they may be able to earn a 10-15% return in two months. 

Earlier, companies used to focus more on dividends than buybacks, but the government has started charging a 30% tax according to the slab on dividends, so companies have started giving benefits to their investors through buyback offers. Taxation on buyback profit is lower than dividend taxation. 

(Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)