TCS gains 3%, nears record high as board to consider buyback on Wednesday

The stock was up 3% at Rs 3,979.90, trading close to its record high level of Rs 3,990 touched on October 8, 2021.

Shares of Tata Consultancy Services (TCS) jumped w3 per cent to Rs 3,979.90 on the BSE in Monday’s intra-day trade after the India's largest information technology (IT) firm said its board will consider a buyback proposal on Wednesday, January 12, 2022. The stock traded close to its record high level of Rs 3,990 touched on October 8, 2021.

The board of TCS was initailly scheduled to meet on January 12 to approve and take on record the financial results of the company for the third quarter and nine months ending December 31, 2021.

In the past one month, TCS has outperformed the market by surging 8 per cent, as compared to 2.3 per cent rise in the S&P BSE Sensex. However, in three months, it underperformed with 0.41 per cent decline, as against a 0.13 per cent gain in the benchmark index.

At 09:33 am; TCS was up 1.1 per cent at Rs 3,989.40 on the BSE. In comparison, the S&P BSE Sensex was up 0.55 per cent at 60,071 points. The counter has seen huge trading activity with 2.4 million equity shares changing hands on the NSE and BSE in first half-an-hour of trade.

In the past, TCS' had two buybacks offers of around Rs 16,000 crore. In 2020-21 TCS had bought back over 53.3 million equity shares under the offer for Rs 3,000 apiece. In 2018, TCS had re-purchased 76.1 million shares at Rs 2,100 per equity share.

Commenting on the earnings expectataions, Motilal Oswal Financial Services in a report said, "The IT services industry should see acceleration in growth from multi-year cloud upgrade cycle. TCS is among the best positioned to benefit from this uptick. It should gain given its strong organic capabilities, diverse presence, deal win momentum, and strong headcount additions. It should also benefit from its superior ability to manage talent supply challenges."

The brokerage firm expects TCS to benefit from the sustained growth given its strong organic capabilities, diverse vertical and geographic presence, deal win momentum, and strong headcount additions.

“TCS is expected t o cotinue its revenue momentum, however supply side pressure would restrict margin expansion. TCS is expected t o register 2.7 per cent QoQ growth in constant currency led by continued improvement in demand from BFSI, healthcare and retail, acceleration in digital technologies, ramp up of deals,” ICICI Securities said.

Further, cross currency headwind would lead t o revenue growth of 2.0 per cent QoQ in dollar terms. In rupee terms, revenue is expected t o increase 3.2 per cent QoQ. EBIT margins are expected expand by 20 bps QoQ to 25.2 per cent led b y flattening employee pyramid, higher offshoring. PAT is expected t o improve 3.3 per cent QoQ mainly led by better operating performance. Investor interest supply-side challenges and attrition, margin outlook, deal momentum, subcontracting costs and CY22 IT budgets, the brokerage firm added in the result preview.