InvestorQ : What is your quick view on the TCS results? Will the TCS buyback be positive?
diksha shah made post

What is your quick view on the TCS results? Will the TCS buyback be positive?

Mary Joseph answered.
10 months ago

There was some visible improvement in the top line of TCS on a YOY and also on a QOQ basis. On 07 October TCS reported sales revenues of Rs.40.135 crore. This was on the back of solid growth in high value clients of value about $100 million and better pricing.

However, net profits at Rs.7475 crore were 7% lower on a YOY basis. That is more due to the Rs.1210 crore provisions that TCS has made for the legal dues to Epic Systems of the US. Epic had filed a case against TCS in a US District Court for infringement of data integrity. SEBI had asked TCS to make the provision despite the ongoing legal tussle.

On the margin front, TCS reported operating profit margin or OPM of 26.6% which is at least 300 bps better and among the best in the industry today. The attrition rate for the quarter was at a low level of 8.9%; by far the best in the IT industry among the industry leaders.

The big buyback announcement also came in at a price that was a lot more flattering than originally anticipated. TCS will buy back a total of 5.33 crore shares at a fairly substantial premium at Rs.3000 per share taking the total size of the buyback to Rs.16,000 crore.

One theory is that the Tata Sons holding company may not participate in the buyback enabling them to enhance their stake in TCS. That would be useful as the Mistry family readies to exit Tata Sons in totality in the coming months.