TCS buyback: Retail investors can buy now and tender for a quick 10-20% gain


Mumbai: Small investors could make a quick buck in the ₹18,000 crore-share buyback offer by Tata Consultancy Services, said analysts. There is scope to earn between 10% and 20% by buying TCS shares now and tendering them in the share buyback though returns would depend on the extent of the acceptance in the buyback offer, they said.

The software services giant has announced it will buy back four crore shares at ₹4,500 apiece. The buyback price is at a premium of 20% over TCS’s Monday closing price of ₹3,744. The buyback is through the tender offer route. Out of the four crore shares that will be bought back, 60 lakh shares or 15% of the buyback is reserved for retail shareholders holding shares worth less than ₹2 lakh on the record date, which is yet to be announced.

Assuming the closing value of TCS on the buyback’s record date is ₹4,500, a shareholder with up to 44 shares will be considered a small shareholder. At a 50% acceptance ratio – the proportion of shares accepted to the total number of shares tendered in the buyback – and a market price of ₹3,738 post the pay-out, investors can earn an absolute return of nearly 10.19% over the next 90 days, according to domestic brokerage IIFL Securities. At an 80% acceptance ratio, investors can make ₹26,670 over an investment of ₹1.64 lakh, which is a return of 16.22%, the brokerage said.

TCS Buyback: Retail Investors Can Buy Now and Tender for a Quick 10-20% Gain

As small shareholders held 0.6% of the company’s total paid-up capital as of March 2021, the entitlement ratio comes to around 27%. In the recent buyback offers, most small shareholders did not participate, boosting the acceptance ratio. The acceptance ratio was 100% in the previous two buybacks by TCS.

The exact number of eligible shareholders as on the record date will be available in the letter of offer, which will be posted within two weeks after the record date.

“Based on the current price, the buyback can provide a return between 10% and 20% for retail investors in the short-term, based on the acceptance ratio,” said Vinod Nair, head of research at Geojit Financial Services.

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