TCS announces up to $2.4 billion share buyback

India's top software services exporter Tata Consultancy Services(TCS) will buy back shares worth up to 160 billion rupees ($2.4 billion), it said on Monday, adding to pressure on similarly cash-rich rival Infosys to follow suit.

The TCS board has approved the buyback of up to 56.1 million shares at 2,850 rupees apiece, the company said in a stock exchange filing, returning cash to shareholders at a substantial premium to Friday's closing price of 2,407.90 rupees.

Its offer is above the record price of 2,839.70 rupees hit in October 2014 and sent TCS shares up 3.9 percent on Monday.

Some former executives at Infosys, meanwhile, have been clamouring for a buyback as friction between the founders of India's second-biggest software services company and its board has spilled into the public domain.

Analysts have largely agreed with those calls, saying that stock repurchases can attract investors at a time when India's $150 billion IT sector faces an uncertain outlook as immigration reforms in the United States cast a shadow over its ability to service clients in its biggest market.

Former Infosys chief financial officer V. Balakrishnan on Monday urged his former company to follow TCS with a buyback.

"If you look at the IT services industry, the growth is slowing down and they are all transforming from growth stocks to value stocks," Balakrishnan told Reuters.

"When you become a value stock it makes lot of sense to return money to shareholders, and a buyback is the most tax-efficient way."

TCS, part of the salt-to-software Tata conglomerate, had total cash and investments of 431.69 billion rupees at Dec. 31. Infosys had cash of 356.97 billion rupees in December.

Wipro, a smaller IT business with cash reserves of 331.55 billion rupees, has also approved a proposal for a share buyback of up to 25 billion rupees.

"Infosys and Wipro are sitting on huge piles of cash, some part of which they should return to the shareholders," said Neeraj Dewan, director at Quantum Securities.

"They (Infosys and Wipro) are not able to do anything with the cash right now and they should take a cue from what TCS has done."

By Sankalp Phartiyal and Abhirup Roy

Source: Reuters