TCS shares scale new high on buyback plan
Shares of Tata Consultancy Services (TCS) scaled a fresh record level in early trade Monday as company board said it will consider share buyback. The share price of India’s largest software services exporter was up 5.25% to Rs 2,655.90 apiece on NSE.
The company board will meet later this week, on October 7, to consider a share buyback proposal.
In the said meeting board is also going to consider its financial results for the September quarter and declaration of a second interim dividend to the equity shareholders.
The Tata Group company has initiated two equity share buybacks in the recent past, both of which were for an aggregate amount of Rs 16,000 crore, coming in 2017 and 2018. In 2018 the shares were bought back by TCS at a price of Rs 2,100 per share — a 14% premium to the stock price back then. TCS bought 7.61 crore equity shares back then. In 2017 the Rs 16,000 crore share buyback, saw TCS buy shares at a price of Rs 2,850 per share, again at a premium to the market value back then.
Decision on the buyback and the size of it will be known later this week when the company meets to discuss the financial performance for the previous quarter. It is believed that TCS has the potential to do a buyback of Rs 20,000 crore, which is 2% of its market capitalization.
TCS is expected to post a strong set of numbers in the quarter on the back of healthy deal wins and uninterrupted business.
Deal momentum has been strong across the sector in 2Q, and deal TCV is likely to be robust for TCS (Phoenix, Morrisons, Coop, and ABB), Infosys (Vanguard and ConEd), HCLT (Ericsson), Wipro (Marelli), Mphasis (RBS), and Mindtree (Husqvarna).
Along with Tech Mahindra, TCS is expected to post one of the strongest margin expansion in the second quarter when compared to the previous quarter.
Along with the equity share buyback proposal announcement, TCS would be providing Rs 1,218 crore as an exceptional item in the upcoming results. On August 20, 2020, the US Court of Appeals, 7th Circuit, Chicago, returned a verdict on the appeal filed by TCS, reducing the damages award. The Court held that the punitive damages award of $280 million is constitutionally excessive, vacated the punitive damages award and directed the Trial Court to reassess the punitive damages. The US Court upheld the compensatory damages award of $140 million.
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