Business

TCS share buyback offer this strategy will give sloppy returns

Photo:INDIA TV

TCS

Highlights

  • Long term investors should stay away from this buyback offer
  • This is an opportunity for short term investors to get huge returns soon.
  • The company will buyback shares worth Rs 18,000 crore at Rs 4,500 per share price

New Delhi. After Tata Consultancy Services Limited (TCS) announced share buyback program of up to Rs 18,000 crore at a price of Rs 4,500 per share, investors are in a quandary as to what to do? The share price of TCS was Rs 4,003 with a slight fall on Tuesday. That is, in the buyback offer, investors will get Rs 500 more than the current price. Now the question arises whether the investors holding the shares of TCS should participate in the buyback or not?

Opinion of market experts on buyback

Market experts say the answer to this question is different for short and long term investors. If an investor is investing for a short period, then he must definitely take advantage of this buyback offer. At the same time, if an investor has invested in TCS for a long period, then he should stay away from this buyback offer. This is because the earnings of IT companies have increased manifold after the Corona epidemic. The need for IT is not going to diminish in the future. At the same time, TCS is a giant in the IT sector. That is, the company’s income is expected to grow rapidly in the coming years. If the company’s earnings and valuations rise, the share price is bound to rise. That is, investors invested for a long period are sure to get huge returns. Experts say that investors should sell their shares under buyback only when the value of the company’s shares is very high (overvalued) and the company does not have any significant growth opportunities.

what is buyback

When a company buys shares from its own shareholders, it is called buyback. This is the opposite of an IPO, as a company sells shares in an IPO. These shares will cease to exist after the buyback process is completed. Buybacks happen for many reasons. The reason for this is the excess cash in the company’s balance sheet. Having too much cash is not considered good.

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