TCS hits 52-week high; extends rally post closure of share buyback

The stock was quoting higher for the eight straight trading session and rallied 6 per cent thus far in December.

Shares of Tata Consultancy Services (TCS) hit a 52-week high at Rs 3,699, up nearly 2 per cent on the BSE in Tuesday’s intra-day trade, thus extending its rally after closure of share buyback.

The stock of information technology (IT) giant was quoting higher for the eight straight trading day. Thus far in the month of December, TCS has gained 6 per cent. It surpassed its previous high of Rs 3,680 touched on October 9.

The Rs 17,000 crore buyback programme of TCS had opened on December 1, 2023 and closed on December 7. TCS had fixed the Rs 4,150 per share for the tender route buyback. The company intended to buy maximum of 40.1 million shares (1.12 per cent equity).

The buyback was in line with the company’s shareholder-friendly capital allocation practices of returning excess cash to shareholders, thereby increasing shareholder value in the longer term, and improving the Return on Equity, TCS said on objective/necessity of the buyback.

Meanwhile, shares of TCS had hit a record high of Rs 4,043 on January 17, 2022. In past one year, the stock performed in line with the market by gaining 12 per cent, as compared to 12.5 per cent rise in the S&P BSE Sensex.

The brokerage firm Motilal Oswal Financial Services (MOFSL) has a positive stance on TCS. It reiterated its ‘buy’ rating with target price of Rs 4,060.

While TCS management has indicated that client spending remains muted in the near term, it is seeing definite signs of macro recovery and improvement in client engagement over the medium term.

Given continued uncertainty in the demand environment in FY24, the brokerage firm has cut its estimates (partially offset by an accelerated revenue conversion of the mega BSNL deal). MOFSL continue to expect TCS to deliver superior growth in FY25 among our Tier 1 coverage, driven by its leadership in cost efficiency, which has led to strong deal inflows in recent quarters. It expects the trend to continue, providing better visibility for FY25 revenue growth despite an uncertain demand environment.

Given its size, order book and exposure to long-duration orders and portfolio, TCS is well positioned to withstand the weakening macro environment and ride on the anticipated industry growth. Owing to its steadfast market leadership position and best-in-class execution, the company has been able to maintain its industry-leading margin and demonstrate superior return ratios, the brokerage firm said in September quarter result update.

TCS has over 250 Gen AI opportunities in pipeline across various industries and has trained more than 100,000 workforce for Gen AI. Management expects that Cloud migration, application modernization, edge to cloud will drive growth ahead. TCS investment in newer technologies and building new capabilities will yield good results in long term, according to analysts at KRChoksey Shares and Securities said.

TCS is well positioned with its size, steadfast market leadership position, best-in-asset class execution and order book (especially exposure to longer duration contracts) to deliver industry-leading growth/margin and demonstrate superior return ratios, the brokerage firm added.