Should you opt for TCS’ Share Buyback Offer?

By Aditya Raghunath — India’s largest IT software exporter Tata Consultancy (NS:) Services will open its Rs 16,000 crore buyback offer on December 18. The offer will close on January 1, 2021.

The company has made a buyback offer and has fixed the price at Rs 3,000 per share. TCS stock is trading at Rs 2,881. Investors have to keep in mind that in order to be eligible for the buyback, they should have held shares of the company on the record date: November 28, 2020. The price of one TCS stock on the date was Rs 2,679. There’s no point in scrambling for shares now.

TCS is trading at a significant premium to its peers in the sector like Infosys (NS:) and Wipro (NS:). The company has always been a shareholder-friendly company and its buyback is a way of returning excess cash to shareholders. It has done share buyback twice in the last 10 years- May 2017 and August 2018.

Investors who plan to hold TCS shares for less than a year should opt for the buyback according to Angel Broking in a media report.

Securities and Exchange Board of India (SEBI) has mandated that 15% of the offer has to be reserved for small shareholders (who hold less than Rs 2 lakh of the stock). This translates to a total of Rs 2,400 crore that TCS has to pay retail shareholders for their shares. This can translate into a 33% acceptance rate for investors who want to sell their shares to the company.

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