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    Rajnandini Kumar 20GEN036 Finance C

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    Rajnandini Kumari
    1) Tata Consultancy Services (TCS), one of India's largest technology companies, announced a share buyback program worth Rs. 18,000 crores to return funds to investors. 2) Under the buyback, TCS will purchase up to 4 crore shares at Rs. 4,500 per share, representing 1.08% of outstanding shares. 3) Experts recommend that investors tender their TCS shares for the buyback, which could provide returns up to 20% given the current market price is lower than the buyback price.

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    Rajnandini Kumar 20GEN036 Finance C

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    Rajnandini Kumari
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    1) Tata Consultancy Services (TCS), one of India's largest technology companies, announced a share buyback program worth Rs. 18,000 crores to return funds to investors. 2) Under the buyback, TCS will purchase up to 4 crore shares at Rs. 4,500 per share, representing 1.08% of outstanding shares. 3) Experts recommend that investors tender their TCS shares for the buyback, which could provide returns up to 20% given the current market price is lower than the buyback price.

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    RajnandiniKumar_20GEN036_LACF_Case2

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    1) Tata Consultancy Services (TCS), one of India's largest technology companies, announced a share buyback program worth Rs. 18,000 crores to return funds to investors. 2) Under the buyback, TCS will purchase up to 4 crore shares at Rs. 4,500 per share, representing 1.08% of outstanding shares. 3) Experts recommend that investors tender their TCS shares for the buyback, which could provide returns up to 20% given the current market price is lower than the buyback price.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    23 views2 pages

    Rajnandini Kumar 20GEN036 Finance C

    Uploaded by

    Rajnandini Kumari
    1) Tata Consultancy Services (TCS), one of India's largest technology companies, announced a share buyback program worth Rs. 18,000 crores to return funds to investors. 2) Under the buyback, TCS will purchase up to 4 crore shares at Rs. 4,500 per share, representing 1.08% of outstanding shares. 3) Experts recommend that investors tender their TCS shares for the buyback, which could provide returns up to 20% given the current market price is lower than the buyback price.

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    of 2

    DR.

    VISHWANATH KARAD MIT WORLD PEACE UNIVERSITY


    SCHOOL OF MANAGEMENT (PG)

    For partial fulfilment of


    Case Study no. 2

    On
    TCS Stock to Turn Ex-Date for Buyback Tomorrow: Experts Strongly
    Recommend Tendering Shares

    By
    Rajnandini Kumar
    20GEN036 Finance C

    Under the guidance of


    Prof. Vedashree Mali
    Faculty

    Legal Aspects of Corporate Finance


    Trimester 6
    Batch MBA – Fin A (2020-22)
    A.Y. 2021-22
    Introduction:

    The case illustrates Tata Consultancy Services, one of India's largest technology companies,
    and how it hires or engages in such corporate behaviour when it does not intend to use those
    resources for expansion. A share repurchases, often known as a buyback, is a mechanism by
    which a company reduces the number of outstanding shares on the open market. TCS has been
    advertising buybacks for some time, and the current price and the repurchase price of Rs. 4500
    (4500-3730=Rs. 770) this time are significantly different. The corporation's surplus is
    employed in the repurchase.

    Analysis:

    This is a good thing because the corporation is sticking to its promise of returning funds to
    investors. However, the 18,000-crore buyback represents 1.08 percent of the total paid-up
    equity share capital. Although a repurchase may result in some earnings dilution, given TCS's
    scale, this is insufficient to provide any meaningful upward trigger to the price. For the purpose
    of distributing the premium amount to shareholders, a total of Rs. 30,000 crores in free cash
    flow will be employed. The Rs. 18000 crores repurchase offer includes 4 crore equity shares.
    This repurchases accounts for 1.08 percent of all outstanding shares. The repurchase is open to
    retail investors with shares worth up to Rs. 2 lakhs, which means that based on the buyback
    price, one can hold up to 44 shares.

    Regardless of the buyback, share prices have been sliding; this could be due to the influence of
    lower market sentiment spreading to IT sector firms. On the record day of the dividend, which
    will be paid on February 7, 2022, the TCS share price declined almost 1%. On the same day,
    the stock hit an intraday low of Rs 3862.50 on the BSE. Even if you don't have any money,
    experts advise selling some existing shares and buying into the scrip for big returns in the short
    term, considerably more than the FD rate, which may be up to 20% at the current price.

    TCS repurchase is a wonderful chance for retail investors, as the stock is up 18% from Friday's
    closing price. The acceptance ratio has historically stayed around 70%, and the stock price has
    managed to cross the buyback price. If we look at the fundamentals, we can see that the outlook
    is bright, despite the fact that valuations are a touch high, and the stock price has already
    corrected from its 52-week high. Retail investors should participate in the TCS buyback, which
    is expected to have a 50-70 percent acceptance rate and allow investors to hold the remaining
    shares for the long term.

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