TCS buyback: Will it be worth tendering shares in the buyback?

“In the long term, we continue to be optimistic on the IT sector, wherein TCS and INFY would remain investors’ favourite counter to hold,” he added.

IT major Tata Consultancy Services (TCS) has recently announced buying back 1.12 per cent of the company’s equity. In its fifth buyback offer till date, TCS has agreed to buy back up to 4,09,63,855 fully paid-up equity shares of the face value of Rs 1 each at Rs 4,150 per share. The buyback is at an 18.5 per cent premium to Friday’s close.

The company has announced its buyback via the tender offer route, using the stock exchange mechanism in accordance with the Securities and Exchange Board of India.In a buyback offer made through the tender offer route, the company fixes a particular price at which shares are bought back from the investors.Lastly, the shares of the company in Monday’s session at 10:47 am traded 0.67 per cent higher at Rs 3526.For the buyback offer, the company has fixed November 25 as the record date, while it shall trade ex-buyback from November 24 onwards.

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What is the record date for TCS buyback?

To avail the offer of the latest buyback from the IT company, you need to own TCS shares in your demat account as on the record date of November 25, while the share price of the company will adjust for the buyback price on the ex-date.

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Analysts’ view on TCS share buyback

“Short-term traders can buy TCS before the record date (Nov 25, 2023) and use the opportunity to generate decent returns based on the assumed entitlement ratio. Based on the buyback rate of Rs 4,150, short-term investors can generate ~18% ROI based on today’s Rs 3519. In addition, investors would also take advantage of tax benefits, as the income generated from this buyback of shares is tax-exempt. We advise investors to buy 48 shares (Rs 200000/4150) to get maximum entitlement under the Rs 200000 retail category,” suggests Prashanth Tapse, Research Analyst, Sr VP, Research-Mehta Equities.

“In the long term, we continue to be optimistic on the IT sector, wherein TCS and INFY would remain investors’ favourite counter to hold,” he added.

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On the technical front, if the stock sustains above Rs 3550, it has the potential to zoom up to Rs 3700 per share. “Since the last 3–4 trading sessions, TCS has seen sudden upside momentum after making a bottom near Rs 3300 levels, and is currently placed near the Rs 3520 mark. At the current juncture, the expected trading range is between Rs 3350 and Rs 3550. On the flip side, if TCS manages to penetrate Rs 3550 and sustain above it on a daily basis, then Rs 3650–3700 can be expected within a few weeks. As we advance, Rs 3450 is credible support, and resistance is seen near Rs 3550,” noted Jigar S. Patel, Sr. Manager-Equity Research, Anand Rathi.

So, in any case, if your shares are not fully accepted  in the buyback, there are chances that the stock will reward potential investors.

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