Information Technology bellwether Tata Consultancy Services (TCS) is expected to buybacks its shares from the investors at a premium of 10-20 per cent spending around Rs 16,000 cr to buy a total of 1 per cent shares. Zee Business’ Senior Research Analyst Varun Dubey brings an exclusive research on this and also explains the rationale behind his calculation.    

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Dubey in his research said that TCS has shown consistency regarding the amount it spends on buyback of shares. It had spent Rs 16,000 cr in all the previous three buybacks.

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The data of the previous three buybacks in 2017, 2018 and 2020 suggest that the company bought back its shares at a premium between 18-20 per cent and the average is 19.3, he added. The premium is calculated over the closing price of the TCS share, one day before the announcement of the buyback.

In absolute terms it translates between Rs 450-500 per share, he further said. These are the two parameters on which, Zee Business has formulated the buyback price, Dubey said and the existing trend suggests that the buyback price this time could be between 10-20 per cent.

Cash rich TCS has been buying back shares in the previous years too. On 30 September 2020, the company had Rs 46,980 cr cash in hand while in September 2021 it was Rs 49,046 cr.

While the cash has been on the up for TCS over the past three issues, the company stuck with the amount it spent for the buyback. Ideally, with higher cash in hand, it should have increased the size of the buyback, the Senior Research Analyst opined.

Dubey said that the announcement of buyback was on 7 January so the buyback is likely to be at a premium of the closing price on 7 January.

On 5 October 2020, the share price of TCS was 2523 while the buyback price was Rs 3000. Prior to this, on 12 June 2018, the share price was Rs 1746 while the buyback price was Rs 2100.

On 16 February 2017, the closing price was Rs 2400 while the buyback price was 2,850. The company has also maintained the price range of the buybacks, he said.

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On 7 January the price of TCS share was Rs 3,850. Considering the past precedents the buyback price this time could be in the range between Rs 4430 and Rs 4625. The research take into account the base case and bull case scenario.    

TCS shares today eneded at Rs 3916 on the NSE, up almost 1 per cent from the last closing price of Monday. India's largest IT company by market capitalisation will be announcing its Q3FY22 results on Wednesday.