Tata Consultancy Services Ltd (TCS) today announced Rs 16,000 crore share buyback -- biggest in the Indian capital market, as it looks to return surplus cash to shareholders. The decision comes at a time when India's largest software services provider is under pressure of losing revenue from its clients in the US, which accounts for 65 per cent of of the USD 155 billion industry, under President Donald Trump's protectionist measures.
TCS said in a stock exchange filing that its board approved buyback of up to 5.61 crore shares, or 2.85 per cent of its share capital, at Rs 2,850 apiece. The share buyback, if successful, will be India's biggest, surpassing Reliance Industries' 2012 share repurchase of Rs 10,400 crore. TCS shares rallied 4.08 per cent to close at Rs 2,506.50 on the BSE, the highest closing price in five months.
TCS Board of Directors has approved a proposal to buyback up to 5.61 crore equity shares of the company for an aggregate amount not exceeding Rs 16,000 crore, the company said in the filing.
The board meeting is the last for N Chandrasekaran as TCS chief executive before he takes over as chairman of parent Tata Sons Ltd, which controls 73.3 per cent of the software developer, tomorrow.
Chandrasekaran had last week stated the company had received suggestions from investors over the need for certainty on dividend policy along with share buyback to distribute large amount of cash to its shareholders. TCS has a cash pile of Rs 43,169 crore, which is nearly 10 per cent of the company's market capitalisation.
Earlier this month Cognizant Technology Solutions Corp announced USD 3.4 billion share buy back, bowing to pressure from activist investor Elliott Management Corp. Share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting share price during periods of sluggish market condition.
Infosys too is being pressed with a demand for share buyback. Infosys is amid a bitter spat between a clutch of high-profile founders and the management primarily over utilisation of cash surplus for enhancing shareholder value rather than paying hefty pay hikes to the chief executive and severance package to departing employees. Infosys' former CFO V Balakrishnan had demanded share buyback to protect shareholders' interest. .