The board of Tata Consultancy Services (TCS) is set to make an announcement regarding a potential share buyback of up to Rs 22,000 crore during their upcoming meeting. Additionally, the company has hinted at considering a second interim dividend, leading some analysts to speculate that the size of the buyback may closely resemble the previous one, should a moderate dividend payout be confirmed.
Deepak Jasani, representing HDFC Securities, envisions the buyback size falling within the range of Rs 20,000 crore to Rs 22,000 crore. He suggests that TCS’s September quarter results, which will be disclosed later today, are characterized by a cautious yet hopeful approach, without any extravagant surprises.
Over the past six years, TCS has distributed a total of Rs 66,000 crore in dividends since 2017, with the most recent one amounting to Rs 18,000 crore in 2022. Notably, in 2022, TCS announced a share buyback of up to 4,00,00,000 shares, totaling Rs 18,000 crore. The company has also previously declared share buybacks of Rs 16,000 crore in 2021, Rs 16,000 crore in 2018, and Rs 16,000 crore in 2017. If a new buyback is unveiled today, it will mark the fifth such share buyback by the IT giant.
Vinod Nair, who serves as the head of research at Geojit Financial Services, anticipates a buyback size similar to those in the recent past. He notes that TCS had relatively low cash reserves in the previous quarter. However, he believes that improved cash levels in this quarter, attributed to reduced capital expenditures, may lead to a board estimate for the size of the share buyback, which could range from Rs 15,000 to 20,000 crore. Nair suggests that recent management commentary indicates an optimistic outlook. Otherwise, he argues, the company would not be considering a buyback in the current economic climate. He expects a buyback similar to the previous ones, accompanied by a moderate dividend payout.
TCS holds a substantial cash position for Tata Sons. Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, acknowledges that IT companies such as TCS generally generate robust free cash flows. However, he highlights concerns about client spending in the US, despite a robust US economy. Investors will be closely monitoring TCS’s management commentary on the outlook for FY24 and FY25. Bathini predicts that the share buyback will likely fall within the range of Rs 15,000-18,000 crore.
TCS is scheduled to release its second-quarter results after the market closes. As of now, the stock was trading at Rs 3,639.45 on the BSE, reflecting a 0.28 percent increase.