TCS gains 3% after it says board to consider share buyback

Andrew Cummings
February 17, 2017

Earlier in the day, Infosys' larger rival, Tata Consultancy Services (TCS) said its Board will meet on February 20 to consider a share buyback.

India's largest software company, TCS today notified the stock exchanges that it would consider a proposal of buyback of equity shares of the company on February 20.

Buyback is the purchase by a company of its outstanding shares, which results in reduction of the number of shares in the open market. Similarly, Quantum Securities Director Sanjay Dutt said the managements of of IT companies were "finally waking up to fact that if you have cash on the books with no alternative use, it is high time you give back money to shareholders", Moneycontrol reported. Share buyback boosts the valuation of a stock even if it maintains the same rice-to-earnings (P/E) ratio. According to Sebi norms, buybacks up to 10 per cent paid-up equity capital and reserves don't need shareholders' approval.

The move comes at a time when investors have been calling upon IT companies sitting on huge cash piles to return excess cash to shareholders through a buyback or through a bonus issue. The company had net cash of Rs 43,100 crore at the end of December 31, 2016.

On Thursday, Infosys hinted that it might also announce a share buyback in the near future.

V Balakrishnan, the former chief financial officer of Bengaluru-based IT major Infosys has also been demanding a share buyback by the company in order to reward shareholders.

"Infosys has a clear, defined capital allocation policy which is periodically reviewed by the Board". After Cognizant's buyback announcement, experts had said it would prompt other large IT firms to consider a similar action.

TCS' outgoing MD N Chandrasekaran said that investors had suggested that the company should distribute its excess cash either in the form of dividends or through a share repurchase programme. "These two comments have come from investors and we will discuss it in the board", Chandrasekaran had said.

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