Everything you need to know about it


Tata Consultancy Services has announced the dates of mega 18,000 crore buyback and the offer will open on 9 March. The window will close on 23 March. The buyback offer will be undertaken at 17% premium (from the announced date) or 4,500 per share.

The company has fixed February 23, 2022, as the record date to determine the shareholders who will be eligible for the buyback.

The IT giant’s promoters Tata Sons and TICL will participate in the buyback offer. Tata Sons holds about 266.91 crore shares in the company and it intends to tender 2.88 crore shares for the buyback, while TICL, which holds 10,23,685 shares, offered to tender 11,055 shares.

At 4,500 apiece, the both Tata Sons and TICL stand to gain about 12,993 crore. TCS is seeking shareholder approval by way of special resolution for buyback of equity shares of the company.

This is TCS’ fourth buyback since 2017 and first for any company in the current calendar year. The company has approved share buybacks worth 16,000 crore each in 2017, 2018 and 2020.

Here’s everything you need to know about the buyback offer

Share buyback, or share repurchase, is when a company buys back its own shares from investors or stakeholders. It can be seen as an alternative, tax-efficient way to return money to shareholders. Buybacks are attractive in tax terms even after considering the 10% tax on long term capital gains (LTCG).

Usually, companies go for share buyback if it wishes to increase demand in the market. Share buybacks reduce the number of shares in circulation, which can increase the share value and the earnings per share (EPS).

When a company buys back shares, it results in a reduction of the number of shares outstanding and the capital base. To that extent, it improves the EPS and the ROE of the company. When the EPS goes up, assuming the P/E remains constant the price of the stock should also go up.

How can you tender shares in buyback

There are two categories retail and general through which one can tender shares in the buyback. The value of shares held in the demat account by February 23, 2022 (record date) end-of-the-day will determine the category through which one will be eligible to apply.

All shareholders holding shares worth 2 lakh or less will be considered under the retail category. While those holding shares worth more than 2 lakh will be considered under the general category.

Investors can tender more shares than their entitlement, and whether these additional shares will be accepted for buyback or not will solely depend on the acceptance ratio decided by the company. The share which are not accepted will be credited back to your demat account by the RTA.

For investors, whose shares are pledged, they are eligible for all corporate action benefits. However, they will have to unpledge the shares before tendering them in the buyback.

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