TCS hits 52-week high, gains 1% in weak market on share buyback plan

Sharekhan believes, despite the challenging environment, TCS is well placed to grab cost takeout as well as digital transformation programs along with opportunities from vendor consolidation

Shares of Tata Consultancy Services (TCS) hit a 52-week high of Rs 3,634.70, up 1 per cent on the BSE in Monday's intraday trade, in an otherwise weak market after the company announced that it will consider a proposal to buyback equity shares at the meeting to be held on October 11, 2023. The company made the announcement on Friday after market hours.

In comparison, the S&P BSE Sensex was down 0.64 per cent at 65,571 at 09:30 AM.

The last time TCS came up with a buyback plan was in 2022 March. The buyback share price per share was Rs 4,500 with a total buyback size of Rs 18,000 crore. The company completed its buyback programme between March 9 to March 23.

Prior to this, TCS had carried out buybacks in 2020, 2018, and 2017, and repurchased shares worth Rs 16,000 crore each.

The buyback plan is in line with the TCS’ 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.

Meanwhile, TCS will also consider the financial results for the quarter ended September 30, 2023, on October 11, and declare the second interim dividend to the equity shareholders.

"Despite the uncertain environment, deal momentum for TCS has been robust with average deal wins of ~$8.9 billion over Q1FY23-Q1FY24 (stronger deal wins of $1 billion plus in the more recent quarters). In the recent months, the company has won large deals from JLR/NEST and BSNL with deal TCV of $1 billion/$1.1 billion and $1.8 billion, respectively. These large deal wins would provide further resilience to its revenue growth profile," according to Sharekhan.

TCS' strong domain expertise, geographical presence, and ability to cross-sell make it well-positioned to grab market share during this challenging environment along with opportunities emerging from vendor consolidation. Revamp of the organisational structure undertaken by the new CEO is expected to alleviate concerns and aid in driving growth, the brokerage firm said.

As concerns on macro uncertainties wane from peak levels, discretionary spends are expected to gradually improve from CY24 along with reduced deal win cycle and faster deal conversion of the deal pipeline to revenues. The brokerage firm, thus, believes despite the challenging environment, TCS is well placed to grab cost takeout as well as digital transformation programs along with opportunities from vendor consolidation.