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TCS plans for another share buyback

ICICI Securities 11 Jan 2022

What’s buzzing:

TCS has announced that its board will consider share buyback proposal while declaring its Q3FY22 financial performance on 12th Jan 2022.

Context:

The company had undertaken share buyback program in 2017 for the first time, worth Rs 16,000 crore, wherein the company bought 7.61 crore shares at Rs 2,100 per share. It has undertaken similar program in 2018 as well as in 2020, where the buyback amount has remained consistent at Rs 16,000 crore. Looking at the historical trend, similar amount can expected this time as well.

Our Perspective:

Acceleration in spending by global enterprises in digital transformation and cloud transformation presents a multi-year growth cycle for Indian IT services companies. We expect TCS to benefit from key spending areas like cloud transformation, customer experience, core modernisation and vendor consolidation. This would translate into robust financial performance over FY21-23 wherein we expect revenue, EBITDA, PAT to grow 16.6%, 20.4%, 23.9%, respectively, as well as robust FCF generation. TCS’ disciplined investment approach and returning 80-100% of FCF generation to shareholders, make its capital allocation policy one of the best in the industry. The cash and investments on the book are at Rs 60500 crore as on Q2FY22.

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