Please refer to important disclosures at the end of this report
1
TCS Buyback | IT Services
January 21, 2022
Buyback 2022 details
Particulars
Details
No. of Shares
4,00,00,000
Buyback Price
4,500
Premium to CMP
17.6
%
Buyback Size
`
18,000 Cr
Record Date
TBA
Small Shareholding
<
`
2Lk based on closing
price on record date
Small Shareholder Reservation
15%
Max # of shares to be held
44
Source: Company, Angel Research
The Board of Directors of Tata Consultancy Services Ltd (TCS), at its meeting held on
January 12, 2022 has approved a proposal to buyback up to four crore shares at
`
4,500 per share. The buy-back aggregates to
`
18,000 Cr, which represents
1.08% of
the total, paid up equity share capital. The buyback will be via the tender off
er route
and as per SEBI regulations, 15% of the offer size (~
`2,700 crore) will be reserved for
small shareholders holding shares upto a value of INR `2 lakh as on the record date.
As per the buyback norms, the reserved portion for the small shareholders is 15% or 6
0
lakh shares. At the price of `
4,500 per share the maximum number of shares held by an
individual will be 44 to qualify for the small
shareholder criteria. Based on the offer
letters and post buyback announcement for the last three buybacks, the total shares
held by such shareholders was <1% of the total outstanding shares.
Historically the
participation rate by small investors has been
less than 100% in all the three buybacks
between 2017 to 2020. However the participation rate has increased from 49.8% in the
2017 buyback to 76.6% and may
increase further in the forthcoming buyback given likely
increase in retail participation.
Therefor
e we believe that the acceptance ratio in the small shareholder category would
be lower than the past buybacks and could be in the range of 30-
50% in the forthcoming
buyback. Although the total returns can vary depending on the acceptance ratio, a
30%
to 50% acceptance ratio can yield profits between 5.8% to 8.8
% assuming that
investors are able to sell the balance shares at current price of `3,827 per share.
Shares held by small shareholder
s as determined at the record date
Buyback Year
% of total o/s shares
2017
0.9
2018
0.7
2020
0.5
Source: Company, Angel Research; Note: Above data is for the small shareholder category
CMP
`
3,827
Not Rated
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 72.2
MF / Banks / Indian Fls 8.0
FII / NRIs / OCBs 15.0
Indian Public / Others 4.8
IT Services
Market Cap (` cr)
14,15,461
52 Week High / Low
4,043 / 2,880
Avg. Daily Volume
25,23,805
Face Value (
`)
1
BSE Sensex
59,465
Nifty
17,757
Reuters Code
TCS.BO
TCS.IN
Price Chart
Source: Company, Angel Research
Jyoti Roy
022
-4000 3600 Ext: 6842
jyoti.[email protected]roking.com
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Dec-18
Mar-1 9
Jun-19
Aug-19
Nov-19
Feb-20
May-20
Aug-20
Nov-20
Feb-21
May-21
Aug-21
Nov-21
TCS |Buyback Update
January 21, 2022
2
As seen in the table(s) below, this group of category has higher entitlement and
has seen limited participation which bodes wells from acceptance perspective.
The past entitlement ratios have come down from 45% to 40% and it is likely that
the upcoming entitlement ratio can trend lower between 35%-40%.
Past entitlement ratios
for tendering of shares for small shareholders
Buyback Year
Shares
Entitled
Against
held
Ratio (%)
2017
9
20
45.0
2018
43
96
44.8
2020
2
5
40.0
Source: Company, Angel Research; Note: Above data is for the small shareholder category
Based on the below exhibit, the participation level for this category has been less
than 100% which improves the chances of shares being accepted. Over the past three
buybacks, the average response rate has been ~54% with 2020 seeing higher
response rate of 76.6%.
Response
by small shareholders has been less than 100%
Buyback Year
Shares
Reserved
Shares
Tendered
Response (%)
2017
84,21,052
41,97,408
49.8
2018
1,14,28,572
40,16,984
35.1
2020
80,00,000
61,25,386
76.6
Source: Company, Angel Research; Note: Above data is for the small shareholder category
Although the total returns can vary depending on the acceptance ratio, a 30% to 50%
acceptance ratio can yield profits between 5.8% to 8.8% assuming that investors are
able to sell the balance shares at current price of `3,827 per share.
Potential return assuming 50% acceptance and unchanged price
Particulars
Shares
Price (`)
Value (
`)
Initial Purchase
44
3,826.6
-
1,68,368
Shares Tendered
22
4,500
.0
99,000
Price Impact on Balance Shares
22
3,826.6
84,184
Total
14,816
Returns
8.8%
Source: Company, Angel Research; Note: Calculation based on NSE closing as on 20 Jan, 2022
Sensitivity analysis of returns
Stock Price
Acceptance Ratio
3,367
3,597
3,827
4,056
4,286
30%
-
3.3%
1.0%
5.2%
9.4%
13.7%
40%
-
0.6%
3.1%
6.8%
10.5%
14.2%
50%
2.8%
5.8%
8.8%
11.8%
14.8%
60%
5.5%
7.9%
10.4%
12.9%
15.3%
65%
6.8%
9.0%
11.2%
13.4%
15.6%
Source: Company, Angel Research; Note: Calculation based on NSE closing as on 20 Jan, 2022
TCS |Buyback Update
January 21, 2022
3
Ratings (Based on Expected Returns: Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Over 12 months investment period) Reduce (-5% to -15%) Sell (< -15%)
Hold (Fresh purchase not recommended)
Research Team Tel: 022 - 40003600 E-mail: research@angelbroking.com Website: www.angelone.in
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