TCS share buyback size at Rs 22,000 crore? What analysts say ahead of board meet

The board of Tata Consultancy Services (TCS) may announce up to Rs 22,000 crore in share buyback when it meets later today. Since the largest IT firm also suggested considering second interim dividend, a few analysts believe the buyback size could be similar to the previous one, if a moderate dividend payout is declared.

Deepak Jasani of HDFC Securities expects the buyback size to be in the range Rs 20,000 crore to Rs 22,000 crore, as he sees "a combination of caution and hope, and no fireworks" in the IT major's September quarter results later today.

Over the last six years, TCS declared Rs 66,000 crore in dividends since 2017, with the last one coming in 2022 at Rs 18,000 crore. TCS announced a share buyback of up to 4,00,00,000 shares, amounting Rs 18,000 crore in 2022.

Besides, it declared share buybacks of Rs 16,000 crore in 2021, Rs 16,000 crore in 2018 and Rs 16,000 crore in 2017. If announced today, it would be the fifth such share buyback by the IT giant.

Vinod Nair, head of research at Geojit Financial Services said he expects a buyback size similar to the last few buybacks. He said TCS had low cash levels in the previous quarter but assuming that its cash levels have improved this quarter due to low capex, Rs 15,000-20,000 crore is what he sees as a board estimate for share buyback size.

"The recent management commentary suggests it is very optimistic. Otherwise, in the prevailing situation, they should not have considered a buyback. Expect a buyback similar to the previous ones, with a moderate dividend payout," Nair said.

TCS is a cash cow for Tata Sons. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities noted that IT firms such as TCS usually command strong free cash flows. Bathini, however, said there are concerns over client spending in the US, even as the US economy is showing a strong growth so far. The expert said investors would be eyeing the TCS management commentary on outlook for FY24 and FY25. He sees the share buyback in the Rs 15,000-18,000 crore in range.

TCS would report its second quarter results after market hours. The stock was trading at Rs 3,639.45 on BSE, up 0.28 per cent.

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