TCS Share Buyback: Tata Consultancy will buy back shares at a premium of around 10% from the current price.
TCS Share Buyback:
The country’s largest IT company Tata Consultancy has announced a share buyback, with results announced on Wednesday. TCS will buy back 5,33,33,333 shares at a price of Rs 3,000 per share. In this way, TCS will spend about 16 thousand crores on its buyback program. The company had a market capitalization of Rs 10,27,177.79 crore on Wednesday. In this way, the company will spend about 1.55 percent of its market capitalization on buyback.
Buyback at 9.6% premium
2737.40 closed on Wednesday. While TCS has announced a share buyback at Rs 3000. This is Rs 62.60 or 9.6 percent more than the current price. That is, investors can earn about 10 percent return by participating in buyback. In its first year 2018 too, TCS brought a share back of only 16 thousand crore rupees. Then the company bought 7.61 crore shares at the rate of Rs 2100 per share.
What is share buyback?
When a company buys its own shares from investors, it is called a buyback. You can also consider it the reverse of an IPO. These shares cease to exist after the buyback process is completed. For buyback mainly two methods – tender offer or open market are used.
Why do companies buyback?
The biggest reason for this is the excess cash in the company’s balance sheet. It is not considered good to have too much cash with the company. It is believed that the company is not able to use its cash. The company uses its excess cash through share buybacks. Many times the company feels that its share price is low (undervalued), then it tries to increase it through buyback.
What is the process?
First, the company’s board approves the proposal for a share buyback. After this, the company announces the program for the buyback. It mentions record date and buyback period. Record debt means that the investors who hold shares of the company till that day will be able to participate in the buyback.
Buyback effect on share
Buybacks affect the company and its stock in many ways. The number of shares of a company present for trading in the stock market decreases. This increases earnings per share (EPS). The PE of the stock also increases. This does not change the business of the company.
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