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News of TCS share buyback offer propels shares up 3%

Livemint logoLivemint 13-06-2018 Ravindra N. Sonavane

Tata Consultancy Services (TCS) Chief Executive Officer Rajesh Gopinathan attends a news conference announcing the company's quarterly results in Mumbai. © Reuters Tata Consultancy Services (TCS) Chief Executive Officer Rajesh Gopinathan attends a news conference announcing the company's quarterly results in Mumbai.

Mumbai: Shares of Tata Consultancy Services Ltd (TCS) gained 2.8% in morning trade on Wednesday after the company said its board of directors will meet on 15 June to consider share buyback.

At 2.33 pm, TCS shares were trading at Rs1,826.95 apiece, up Rs45.95—or 2.58%—from previous close. In intraday trade, the stock climbed as much as 2.75% to Rs1,830 a share. The scrip gained for the sixth consecutive session and advanced over 6% in this period. So far this year, it has gained over 34%.

The company in a regulatory filing on Tuesday has not disclosed the details of its buyback, including the size of repurchase and the price at which it will buy shares.

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Recently, TCS gave one for one bonus to its shareholders. Last year, TCS, Infosys Ltd and Wipro Ltd have returned $9.75 billion to its shareholders to keep investors’ faith amid slowing growth in the sector. TCS repurchased Rs16,000 crore shares, while Infosys and Wipro repurchased worth Rs10,000 crore and Rs11,000 crore, respectively.

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Analysts say that the share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting stock price during sluggish market conditions.

The three companies together have more than $12 billion in cash. In addition, they generate about $7.5 billion cash every year, suggesting that these companies have enough cash to reward their shareholders.

On Tuesday, TCS said in a notice to exchanges that it $1.36 billion in revenue over 10 years from its partnership with a unit of British insurer Prudential Plc. TCS said it will get $668 million in business from the Prudential unit in addition to the $690 million order it got from the UK insurer in January.

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