India’s largest software exporter TCS’ board of directors will meet on Friday to consider a proposal to buy back shares. Industry expects the buyback will be at least ₹10,000 crore.
“..the Board of Directors will consider a proposal for buyback of equity shares of the Company, at its meeting to be held on June 15, 2018,” TCS said in a stock exchange filing.
While TCS did not disclose any further details about the buyback including the number of shares that it plans to repurchase and at what price, industry watchers expect the buyback to come at a similar level as its last year’s mega buyback.
During its fourth quarter earnings call, CEO Rajesh Gopinathan said the company’s intention is to keep capital return close to 80-100 per cent of annual free cash flow. Last year, TCS announced a ₹16,000-crore mega share buyback at ₹2,850 apiece that closed on May 31. Infosys similarly repurchased shared worth ₹10,000 crore, while Wipro bought back ₹11,000 crore worth of its stock.
“Last year, TCS had bought back 5.6 crore equity shares, representing around 2.85 per cent of its total equity for around ₹16,000 crore, which was around 118 per cent of its FCF. We also expect Infosys to come out with a buyback programme sometime in this year,” Sharekhan said in a note.
“For FY19, we have factored a total payout of ₹23,900 crore, in-line with TCS’s outlook for a payout of 80-100 per cent of FCF,” Urmil Shah, Research Analyst at IDBI Capital, said. “We see a high probability of the quantum of buyback in this year being at least at the same level as in FY18 or ₹16,000 crore. If the buyback is done at ₹1,800 (near to CMP of ₹1,781), TCS would be able to buy back 2.32 per cent of its outstanding shares,” he said.