TCS share buyback 2023 to open today. Should you tender shares? Sharekhan answers

Tata Consultancy Services Ltd (TCS) share buyback 2023 will kick off today. The IT giant had in October, along with its quarterly results, suggested its intent to buy back Rs 17,000 crore worth shares at a premium price of Rs 4,150 per share through tender route. Analysts noted that small shareholders with a maximum of 57 shares as on the record date, which was November 25, could participate in the buyback and benefit from the gap in the current market price and the buyback price.

As per TCS, the official entitlement ratio is 17 per cent based for small investors. Sharekhan said the past experience shows that all shareholders do not participate in buyback and the final acceptance ratio could be at 30-35 per cent.

It said existing shareholders, who are holding TCS’s shares for long term investment in their portfolio worth less than Rs 2 lakh on November 25 (record date) could use the buyback route and tender their shares, maximum of 57 shares, to get premium buyback price of Rs 4,150.

Post the buyback settlement, investors can again buy back the same numbers of shares accepted in buyback at prevailing market price for long term investment and continue to hold unaccepted shares in the portfolio, Sharekhan said.

"Given the potential acceptance ratio and possible upside for retail/small investors, it is advisable to tender shares in buyback. After the buyback, investors have the option to reinvest in the same number of accepted shares at relatively lower prevailing market price. Fundamentally, we have 'Buy' rating on TCS, with an unchanged price target (PT) of Rs 4,200," it said.

TCS buyback history

Sharekhan noted that the acceptance ratio has been 100 per cent during the previous TCS share buybacks in 2017, 2018 and 2020. That said, the acceptance ratio was about 24 per cent in the last share buyback in 2022. "Official entitlement ratio is 17 per cent based for small investors. However, the past experience shows that all shareholders do not participate in buyback and the final acceptance ratio could be at 30-35 per cent," it said.

 

Small investors can tender one equity share for every six shares they held on November 25. All other eligible shareholder can tender two shares for every 209 equity shares they held on the record date.

TCS share buyback timeline

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