Markets

Published: October 7, 2023
Updated: October 7, 2023

TCS Set to Consider Share Buyback Amidst Strong Year-to-Date Performance

Tata Consultancy Services (TCS) has announced its plans to consider a share repurchase proposal on October 11, coinciding with the release of its second-quarter earnings. This article provides insights into TCS's recent stock performance, its history of returning value to shareholders, and the potential impact of the upcoming share buyback.

Impressive Year-to-Date Stock Performance:

TCS has demonstrated robust performance in the stock market, with its shares gaining 11% year-to-date. This performance outpaces the Nifty 50 index, which has delivered an 8% return between January 2 and October 6.

History of Generous Returns to Shareholders:

In the past fiscal year, TCS returned a substantial ₹42,079 crore, which represents 108.2% of its free cash flow, to shareholders through dividends. Additionally, the company executed an ₹18,000-crore share buyback program in the previous year, repurchasing four crore shares at ₹4,500 each.

Benefitting Parent Company Tata Sons:

Tata Sons, holding a 72.3% stake in TCS, has emerged as a major beneficiary of these shareholder-friendly initiatives. Over the last three years, TCS has returned an impressive ₹99,514 crore to shareholders through dividends and share repurchases.

Outperformance Despite Growth Challenges:

TCS's stock has performed remarkably well despite expectations of slower growth in the current fiscal year, which could be the weakest since the global financial crisis in 2008. Analysts, including those at JPMorgan, anticipate single-digit growth for India's IT sector in this period. While TCS does not provide specific annual guidance, the management has acknowledged the challenges of achieving double-digit growth.

Second-Quarter Performance:

TCS reported a profit increase of 16.8% to ₹11,120 crore in the first quarter of fiscal year 2024, compared to ₹9,519 crore in the same period last year. However, the company witnessed a sequential decline of 2.7% in profits from ₹11,436 crore in the fourth quarter of fiscal year 2023.

Share Price and Future outlook:

TCS's shares closed 0.89% higher at ₹3,621.40 apiece on the NSE on the day of this announcement. As the company prepares to deliberate on the share buyback proposal, its strong year-to-date performance and commitment to rewarding shareholders underline its resilience amidst evolving market conditions. TCS continues to navigate challenges while maintaining its focus on shareholder value, reinforcing its reputation as a market leader in the IT sector.