TCS (Tata Consultancy Services Limited) subsidiary of the Tata Group giving an opportunity to make quick money
TCS is planning to Buy Back.
What is Buy Back?
A buyback is nothing but a re-purchasing of the sold item by the original seller in short when a company buys its own share from their shareholders it’s called buyback.
Buyback and Dividend are the two ways by which companies can use their excess cash which they are not going to use in expansion of the company. Now the question arises the why companies are now days going towards a buyback option over dividend?
So the simple answer to this question is to avoid the tax as government charge a tax on the dividend. And by doing so companies are reducing the no of shares in the market which leads to increase in share value.
Who can all participate in this buyback?
Here we have to first understand the terminology of the Record date. Companies announce one XZY date all shareholder of that company’s shares before this date are eligible for buyback such date called record date.(TCS going to announce that date by end of June 2018)
Retail shareholders, FII (foreign institutional investors) DII (domestic institutional investors), Local Body, Promoters all can participate in the buyback, providing they are shareholder before the record date.
Now let’s talk about the retail shareholders (means us), Investors who have less than 200000 INR shareholding are comes under retails investors now as TCS has announced buyback price will be 2100 INR so after calculation we know the investors who have 95(200000/2100) or less than 95 shares of TCS can enter in this buyback as retail investors.
How to participate in the buyback?
Either you can contact your broker they will help you in the process if they are not cooperative enough you can visit the company website for the instruction.
This time when I am writing this post TCS share price is around 1850.
If u buy 95 shares @ 1850 and sell 95 shares at 2100 u will earn 23750 (assuming 100% acceptance ratio)
After all this if you ask me for my opinion on such buybacks then its show some negative future impact on companies growth as they are not using their excess cash to expand, innovations, R&D, mergers and acquires it means the future growth of the company can be in question and as a shareholder we invest in companies expecting their growth and such a signals are not a good for companies future growth.
This whole article is just my own study and opinions about upcoming TCS buy back if u want to invest you can study and invest on your own risk.
Thanks & Peace