Analysts said the strong participation was because the buyback offer price of ₹4,500 was 21% above the current stock price. Shares of TCS closed at ₹3,712.40 on Wednesday.
Analysts said there was a spike in shareholder participation in the buyback following the weakening of the share price. The stock had fallen as much as 15% from its 52-week high of ₹4,045.50 on January 18. It has, however, recovered some of its losses.
TCS will extinguish 1.08% of its equity shares after the buyback process is completed. The extent of promoter Tata Sons’ participation in the buyback could not be ascertained.
For small shareholders, the buyback ratio is one share for every seven held, while for the general category, it is 1 for every 108 shares held. As per Sebi rules, 15% of the total buyback size is reserved for small investors, whose holding value is up to ₹2 lakh in the company.
This is the fourth buyback from TCS. Earlier in January 2021, the company did a buyback worth about ₹16,000 crore. Tata Sons had tendered shares worth ₹9,997.5 crore.
The acceptance ratio this time is likely to be much lower than previous buybacks done by TCS because of the strong participation. Brokerage Edelweiss said the final acceptance could be in the range of 1.5-2.8% against its initial expectations of 5-6%.
“In the previous three buybacks, retail category acceptance has been 100%, but now with an attractive spread and massive demat account additions in the past one year, we continue to believe the acceptance to be somewhere around 40%,” said Edelweiss.
The acceptance ratio in 2021 was 100% for retail and 10% for non-retail investors.
In 2017 and 2018, TCS had done two share buybacks worth ₹16,000 crore each. In 2018, TCS bought back the shares at ₹2,100 per share, while in 2017, the price was ₹2,850 per share.
India’s second-largest software exporter Infosys did a ₹9,200- crore buyback in September last year.
