TCS board to consider buyback along with Q2 results this week; shares clock 52-week high

Tata Consultancy Services (TCS) shares rose to scale a 52-week high on Monday, shrugging off broad-based weakness on Dalal Street, after the Tata group IT major said its board would consider a share buyback plan when its board meets this week to approve its quarterly financial results. The stock of TCS, the country's largest IT company, gained by as much as Rs 59.8, or 1.7 per cent, to Rs 3,680 apiece on BSE, surpassing an existing 52-week high touched on Friday. 

The software exporter, which is due to kick off the corporate earnings season for India Inc on October 11, did not disclose the quantum of the buyback. 

A buyback of shares by TCS will be its fifth over a span of six years.

According to Zee Business research, Tata Consultancy Services could buy back about 1.2-1.3 per cent of its equity through the buyback, worth an estimated Rs 19,500-21,500 crore.

The buyback could be at a price of around Rs 4,500, which translates to a premium of about 24 per cent from the current market price, according to the analysts. 

The company had cash and cash equivalents to the tune of Rs 60,942 crore at the end of June 2023. 

Tata Consultancy Services' proposal comes within a year of the completion of buyback offers by rival IT giants Infosys and Wipro. 

The stock finished the day stronger by Rs 17.1, or 0.5 per cent, at Rs 3,637.3 apiece on the bourse.

Should you buy, sell or hold TCS shares?

Zee Business analyst Kushal Gupta recommends buying TCS futures for a target of Rs 3,720 with a stop loss at Rs 3,580.

"TCS has been consistently considering buybacks of shares, and the upcoming offer is amidst prevailing macroeconomic headwinds in the IT sector. This move will instill confidence in shareholders. The company is persistently able to generate value and inflows to shareholders irrelevant to the growth cycle of the industry. Considering the historical trend, the forthcoming buyback of shares is forecast to be similar in size to past ones," Vinod Nair, Head of Research at Geojit Financial Services, told Zeebiz.com. 

Here's a brief history of buybacks by TCS in the past: 

"The stock is currently trading at a slight premium compared to its long-term average, though it is not expensive. The short-term trend will depend on the offer price, which is yet to be finalized. Currently, we have a positive rating on a long-term basis due to big-deal wins," Nair added. 

Geojit has a 'buy' rating on the TCS stock with a target of Rs 3,879, which implies a 6.6 per cent upside from the current level.   

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