Buyback not enough for TCS

Shares of Tata Consultancy Services Ltd (TCS) hit a new 52-week high of ₹3,679 apiece on Monday, after the information technology (IT) company on Friday said it will consider a buyback of its shares.

- Harsha Jethmalani

Buyback is a way of rewarding shareholders wherein a company buys back its shares usually at a premium to current prices.

TCS on Wednesday announced a buyback of ₹17,000 crore for ₹4,150/ share, higher than the current market price of ₹3,542.55. This buyback is in line with its capital allocation policy and certainly points to its robust cash flow. However, since the IT industry is going through a challenging phase, the move does offer comfort. Moreover, dull September quarter (Q2FY24) earnings performance and subdued management commentary leaves investors scrambling to find a direction.

Amid low expectations, TCS's year-on-year constant currency (CC) revenue growth fell to a multi-quarter low of 2.8% in Q2. Key verticals of BFSI and retail slowed down. Among geographies, US and Europe disappointed.