TCS SHARES BUYBACK: A GREAT OPPORTUNITY

TCS declared on 15 June 2018 that its board of directors had affirmed a buyback of in excess of 7.6 crore shares of the organization for a sum not surpassing Rs 16,000 crore. Every equity shares would be acquired at the declared buy back price of Rs 2,100.

The market is amped up for the buyback, particularly after the effective buyback a year ago. Be that as it may, did you know, you can consider purchasing the stock before the buyback and offer it at the buyback?

WHAT OUR FUNDAMENTAL AND TECHNICAL RESEARCH TEAM SAYS:

We suggest retail investor to accumulate ~95 share of TCS to participate in the buyback offer.

WHY PARTICIPATE IN TCS BUYBACK?

The most compelling motivation lies in the stock price of the company.

A Good price:

TCS shares closed at Rs 1,844 on 28th June. However, the buyback price offered is Rs. 2,100 per share. That’s a difference of 13.3%. This can be a profit opportunity for short-term investors or defensive traders.

Be that as it may, that is not all. There are numerous more reasons excessively like:

Extensive tops have a tendency to have bring down dangers: Keeping current economic situations at the top of the priority list, the TCS buyback can offer generally safe and direct comes back to the retail investors.

Better possibility for small long term investors: SEBI has coordinated that in all buybacks, 15% ought to be saved for small investors. This means small investors have a better chance of having their buyback bid accepted.

No obligation, just money: TCS intends to utilize its sit without moving money to purchase back the offers. Post the buyback, TCS’s cash reserveswould descend by 1/third.

Higher profit per share: With decrease in share capital because of buyback, we expect EPS accumulation.

Better acknowledgment proportion: We anticipate that TCS’s buyback will have an acknowledgment proportion of over 35% for retail speculators. The acceptance ratio is the proportion of shares tendered in the buyback that the company could eventually buy.

WHAT IF TCS BUY BACK GOES WRONG ?

We have worked out couple of situations with respect to acknowledgment proportion and post buyback deal cost, and in this manner, potential benefits. You can discover every one of these points of interest and the cost at which you can equal the initial investment on your interest in the exploration report.

 

DETAIL RESEARCH REPORT OF TCS SHARES BUYBACK 

TATA CONSULTANCY SERVICES LTD (TCS)

PRICE RS.1840 BUY BACK PRICE RS.2100 NOT RATED

We expect TCS’s buyback to have an acceptance ratio of more than 35% for
retail investors. Based on this assumption, retail investors can buy 95 shares,
assuming stock price remains at or below Rs.2100 on the record date.

TCS Buyback Details

 On 15th June’18, TCS has announced its second buy-back of Rs. 160 bn (max.).
 It will buy back upto 76.19 mn shares i.e. upto 1.99% of the paid-up equity
capital.
 The buyback is proposed to be made under the tender offer route.
 The company has fixed a price of Rs 2,100/share, ~14% higher than CMP.
 Buyback will be supported by cash of Rs ~480bn as of March 2018, which
would come down by one-third (Rs ~320bn) after the payouts.
 With reduction in share capital due to buyback we expect EPS accretion.
However, the cash reduction would result in a decline in other income, which
is dominated by a yield of 8% on a pre-tax basis on the cash.
 We expect the acceptance ratio for small retail investors to be high because
of the SEBI’s mandate that companies reserve 15% of the buyback for small
shareholders with holdings of less than Rs. 2 lacs as on the record date (not
yet announced).
 This implies a lesser acceptance ratio for institutional holders, depending on
how much the promoter is tendering in the process.
 We expect breakeven price for retail investors to be ~Rs.1750/share as against
CMP of Rs.1840/-

 

Disclaimer – Wolf of Dalal Street is Kiran Sheth perspective and views on the market. The blog is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this website articles on financial markets you agree to make no trade relying in whole or in part on the comments of the writers. And also an advice please refer and consult your financial expert before investing. Happy Investing.