TCS in focus ahead of ex-date for share buyback; down 3% from day's high

Shares of Tata Consultancy Services (TCS) are in focus in Monday’s trade ahead of ex-date for its share buyback tomorrow, February 22, 2022. The stock hit an intra-day low of Rs 3,705.80, falling 3 per cent from its intra-day high of Rs 3,812 on the BSE. It had opened 0.5 per cent higher at Rs 3,812 in an otherwise weak market.

At 11:57 am; TCS was trading 1.6 per cent lower at Rs 3,735, as compared to a 0.17 per cent decline in the S&P BSE Sensex. It has corrected 8 per cent from its 52-week high price of Rs 4,045.50 touched on January 18, 2022. However, in the past three months, it has outperformed the market by gaining 7.5 per cent, as against a 3 per cent decline in the Sensex benchmark index.

The information technology (IT) consulting & software company has fixed February 23, 2022, as the record date for share buyback. The board of directors of TCS on January 12, 2022 had approved to buyback up to 40 million equity shares of face value of Rs 1 each at Rs 4,500 per equity share for an aggregate amount of upto Rs 18,000 crore. The amount is 12.5 per cent higher than the company's previous buyback.

Acceptance ratio

Motilal Oswal Financial Services expect the acceptance ratio to be in the range of 30-50 per cent which could give a potential return of 5-9 per cent (pre-tax) with a time frame of 1-2 months (assuming one is able to sell the remaining un-tendered shares at current price around Rs 3,818 on February 15, 2022). See detailed buyback strategy below

Retail investors looking for short term opportunity can buy the shares of TCS (upto the value of Rs 2 lakh - as on the record date) from the open market and tender them in the buy-back offer, the brokerage firm said in a report dated February 15, 2022.

TCS buyback strategy