TCS buyback: Rs 18,000-cr offer subscribed over 6 times on last day

The Rs 18,000-crore TCS buyback offer has received a massive response from investors as the over 6 times shares were tendered around 10.20 am on Wednesday, the last day of the India's largest IT firm's buyback programme.  

Against the buyback size of 4 crore shares, 25.30 crore shares (632%) were tendered so far on the last day.  

TCS is executing buyback 4 crore shares at a price of Rs 4500 per share. The IT behemoth buyback offer began on March 9.   

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On buy back price of Rs 4500, a retail shareholder was allowed to buy up to 44 shares (Rs 2,00,000) to be eligible under retail category. 

What is buyback offer? 

The buyback is a corporate action in which a company buys back its shares from the existing shareholders, usually at a price higher than the market price. When the company buys back its shares, the number of shares outstanding in the market reduces. A buyback allows companies to invest in themselves. By reducing the number of shares outstanding on the market, buybacks increase the proportion of shares a company owns.

What should investors do? 

TCS buyback price is 4500, which is at a ~22% premium above CMP of 3700. The entitlement ratio is 1 share for 7 shares held for retail shareholders whereas for the non-retail category it is 1 for 108 held, 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," he added.   

Acceptance ratio 

TCS has come up with Rs 16,000-crore buyback in 2020, which saw 100% acceptance ration for retail investors and 10 per cent for non-retail investors, as per an Edelweiss study. 

Zee Business Managing Editor Anil Singhvi had strongly recommended retail investors to apply for the buyback offer floated by the IT behemoth. " It is a golden opportunity. A must apply offer to make money in a weak market. The premium offered by TCS is very attractive this time. Also, the acceptance ratio in retail category is very high.," Anil Singhvi had said.. 

Previous buybacks by IT majors 

Earlier, last year, IT majors Wipro and Infosys had announced buyback offers of Rs 9500 crore and 9200 crores in January 2021 and September 2021. 

Meanwhile, around 10.3 am, TCS shares were trading flat at Rs 3705.15 per share in Wednesday's intraday trade on the BSE. TCS stock has trade on 52-week high value of Rs 4045.50 on January 18, 2022 and touched 52-week low of Rs 3,004.80 on May 3, 2021. 

(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.)