MUMBAI: Small shareholders who take part in the TCS’ Rs 18000-crore buyback could earn potential returns of 6% to as much as 13.5-18%, depending on how many of the tendered shares are accepted by the company.
Those holding up to Rs 2 lakh worth of shares are categorised small, as per capital market regulator Sebi. These investors can take part in the buyback, if they hold the shares as on the record date of Wednesday, February 23. Investors not having the share can purchase it before or latest by Monday February 21 to be eligible for the buyback.
The company is offering to buy back 4 crore shares, or 1.08% of its paid-up equity share capital, at Rs 4,500 per share, aggregating to Rs 18000 crore. Since 15% of the total buyback is reserved for those holding up to Rs 2 lakh shares, around 60 lakh shares will be set aside for this category of shareholder.
As Rs 2 lakh is the upper limit for this category, a small investor can buy a maximum of 44 shares (200,000/4500). “Past TCS buybacks have seen acceptance ratios of 70 -100%,” said Jitendra Upadhyay, senior research analyst, Bonanza Wealth Management Research. This is TCS’ fourth and largest buyback in five years.
If an investor buys 44 shares at February 16 closing rate of Rs 3,813 apiece, total investment is Rs 1.67 lakh. If TCS accepts 75% of the tendered quantity of 44 shares, it translates into 33 shares being bought at Rs 4,500 apiece or a total of almost 1.49 lakh. Add that to 11 shares purchased at Rs 3,813 or Rs 41,943, the total return is Rs 1,90,443. Deduct the original investment amount of Rs 1,67,772 from that and the gross return is Rs 22,671, translating into a 13.5% return.
Since there are 2.23 crore small shareholders, and 60 lakh have been reserved for small investors in the buyback, it implies around 27% of the shares tendered will be accepted. However, past buybacks have a much higher acceptance ratio.
