TCS announces ₹16,000 crore share buyback, India’s biggest
This is biggest buyback in the history of India’s capital markets, surpassing Reliance Industries’ share repurchase of ₹10,400 crore in 2012.
TCS on Monday Feb 20,2017 announced that it will do a buyback of 5.61 crore shares (representing 2.8 per cent of the outstanding shares) at a price of Rs 2,850 per share.
On Monday Feb 20,2017’s close’ the buyback price is at a premium of 14 %
It makes sense for investors who hold TCS shares to consider selling in this offer, as it comes at a valuation of 20.76 times the expected EPS of 2016-17.
The company’s estimated earnings per share for 2016-17 is ₹133. Post the buyback as outstanding shares reduce, EPS will be ₹137. At the current market price of ₹2,500 per share, the price earnings ratio of the stock is 18.2 times, however, at the buyback price of ₹2850, the PE comes to 20.76 times. Infosys is trading at 16 times its estimated earnings for 2016-17. Retail investors however should note that the acceptance ratio is going to be very modest.
The total public holding in the stock is 52.5 crore shares, of which 5.6 crore shares will be bought back by the company through the offer. This means only one in ten shares can be sold to the company in the offer. Since, the acceptance ratio is modest, it doesn’t make sense to buy the shares now to benefit from the high price offered for the buyback.
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