February 22, 2017 / 13:47 IST
TCS’ board of directors have approved a proposal to buy back up to 5.6 crore equity shares at Rs 2,850/share on a proportionate basis under the tender offer route for an aggregate amount not exceeding Rs 16,000 crore. Buyback of 5.6 crore shares makes up 2.85% of total outstanding shares of 197 crore (FY16), which is expected to boost TCS’ return ratios by 500 bps.
Outlook
Despite a buyback boost to shareholders, we maintain our HOLD stance. This is owing to uncertainties regarding a growing protectionism stance in the US and European markets, which could impact margins if it fructifies along with uncertain IT spend due to a volatile macro environment. Consequently, we maintain our target price of Rs 2,465 (17x FY18E EPS). We estimate rupee revenue, PAT CAGR of 9.1%, 7.0% in FY16-18E (average 26.1% EBIT margins in FY16-18E) vs. 23.8%, 22.8% reported in FY11-16, respectively.
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