Indian Tech Giant TCS to Consider Share Buyback Next Week

(Bloomberg) -- Tata Consultancy Services Ltd. will consider buying back shares for the second time in two years, which could funnel cash back to its holding company and biggest shareholder Tata Sons Pvt. 

The board will discuss the proposal when it meets Jan. 12, TCS said in a statement Friday, without elaborating. It had repurchased 160 billion rupees ($2.2 billion) of shares in January 2021. 

“For TCS, which generates huge free cash flows like other IT companies, share buyback is the most tax-efficient option to reward its shareholders and management compared to the dividend route,” said Ajay Bodke, an independent market analyst. “The buy back of shares lifts scarcity value of shares and hence the price gets impacted positively.” 

India's top IT firm is among a clutch of software firms that have benefited from the pandemic and a subsequent shift toward automation, the cloud and e-commerce. TCS is due to report earnings for the third quarter ended December on Jan. 12.

Bloomberg Intelligence senior technology industry analyst Anurag Rana wrote on Jan. 5 that TCS' third quarter earnings could top expectations of 14% sales growth by about 300 basis points. Accenture's results on Dec. 16 showed record bookings, and Rana expects TCS to echo this. 

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