Not sure if some of you have been looking at TCS buyback which is at 15% premium to the market price. The amount of buyback relative to the overall market cap is just under 3% which makes me wonder how one can profit from this special situation. If some of the fellow boarders can shed some light on how they plan to make money on this, or how they have made money in some other buybacks, it would be very useful. Thanks.
The acceptance ratio is likely to be between 10 to 15% for small shareholders holding less than Rs 2 lacs shares as on record date. But it has been seen that many shareholders dont opt for buy back due to lack of information or strong desire not to sell the shares. Hence practically the ratio could be 30-40 percent and hence it will reduce the overall cost of balance shares if some one wants to hold for LT else can sell the balance if the objective is just to participate in buy back.
In case if we buy TCS shares to particulate in this buy back , do we need to pay short term gain tax for the shares which company buys back…experts view is much appreciated on this.
This depends on the period of holding of the shares you have tendered. If held for more than 12 months, it will result in LTCG and vice versa.
I am looking into IT companies past few months for investing near to medium term. Few data I am backing on:
- Out of median PE of 22, IT sector is already down by 1 standard deviation (SD) and currently lying at PE of 17.
- The PE ratio has gone below 1 SD three times in past, once in May 2003 when it touched lowest of 16 PE, another during 2008 (record low of 10 PE) and last during 2012 of 15 PE and been near there for nearly a year.
- Every time it crossed PE of 16 it bounced back immediately with exception of 2012 where it kept bouncing back and forth nearly three times.
- Recently it went to low PE of 14.5 and currently is at PE of 17. Whether is is a short upward move or starting of new rally that needs to be seen.
- We have been hearing a lot about IOT revolution and structural changes for quite a time now. I think the time is approaching to allocate some qty in some well known midcaps and largecaps available at current fair prices which can be on upside when earnings improves and changes PE multiple.
- Also the buyback news of few firms further backs up the situation.
Many peoples are already telling to stay away from this sector for next 1-2 years. But, I think IT sector is already at its down levels and is in its way to turn around sentiments. I think one should enter keeping horizon of 3-4 years (with multiple buys on declines) so that all developments get clear by that time and people get handsomely rewarded. If we wait to enter after everything gets clear then may be by then much of the gains will be already realised. After all we need to buy good companies during extreme pessimism. Agree that IT will not grow like it used to be in past days but I think our dependency on tech is increasing exponentially and there is huge room for sufficient growth ahead.
source:http://historic-pe-ratio.weebly.com/nifty-it-pe-chart.html
Dis–Not invested in any IT companies. Evaluating the options available.
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As per the last annual report, the percentage of small shareholders (less than 100 shares) is 1%. At this percentage the acceptance ratio will be 42%.
Explained in detail at https://capitalmind.in/2017/02/tcs-announces-buyback-of-shares-is-it-worth-the-arb-for-small-retail-investors/
Shareholding pattern in Annual report and quarterly shareholding pattern report don’t match. Any idea why the numbers are so different.
Details for TCS is below. HCLTECH reports also have similar mismatch.
As per Annual report, as on March 31 2016 the percentage of small shareholders (less than 100 shares) is 1% (page 123) - http://investors.tcs.com/investors/Documents/Annual%20Reports/TCS_Annual_Report_2015-2016.pdf
As per quarterly shareholding report, as on March 31 2016 the percentage of small shareholders is 3.37% (page 4)
http://investors.tcs.com/investors/Documents/Shareholding%20Pattern%20and%20Capital%20Structure/TCS_Shareholding_Q4_16.PDF
That 3.37% is for shareholders holding less than 2lac of share by face value. Ie less than 20000 shares with FV of 10 Rs
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http://www.financialexpress.com/market/tcs-buyback-dont-cheer-the-high-offer-price-yet-you-may-get-nothing-out-of-it/559967/
http://www.deccanherald.com/content/603312/buyback-shares-flavour-season.html
@8sarveshg, @deepakaswal What is record date for buyback ?
Not yet announced. I guess they will do it after they get approval from shareholders.
I have some confusion based on posts by @deepakaswal and @arghzme
In the Shareholding pattern where it mentions, “Individual share capital in excess (or less than) of Rs. 2 Lacs” Does it mean based on Market value (on whatever date the SHP is given for eg 31 Dec) or is it based on Face value?
TCS FV is 1 Re so would that mean 2L shares?
TCS came up with a buy back of INR 16000 cr. At Rs. 2850 apiece, the number of shares that are to be bought back are 5.61 Cr shares. Out of these, 15% i.e. INR 2400 Cr or 84.21 Lac shares are reserved for retail category. As per the last annual report published by the company(2015-16), 1.96 cr shares are held under 1-100 category which makes an acceptance ratio (AR) of 42.9% however investors holding up to 80 shares would fall under retail category which will be below 1.96 cr figure so this will push AR in positive territory.
The above table is self-explanatory.
Shareholders holders holding upto 70-80 shares (depending on price on RD) would be eligible under retail category.
Buy back price - 2850 x 70 = 1,99,500
Factor negatively affecting Acceptance Ratio
- Number of incremental investors taking position under retail category to take advantage of this special situation.
Factors positively affecting Acceptance Ratio
-
Not all 1.96 Cr shares as mentioned above are eligible as shareholders having shares up to 70 would fall under retail category.
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Not every investor who is falling under retail category would tender his shares. Possible scenarios are as under –
a. People not tendering their shares - Some are long term investors and intend to keep it for their coming generations and won’t consider tendering their shares in buy back. Another category of investors who are EITHER ignorant/not updated OR even if they are aware of it, they avoid going through complicated process of buy back (As it seems from outside).
b. People Tendering their shares –
i. Investors tendering 100% shares – Total shares will be in lock-in till the buy-back process is complete. In this case, shares which are not accepted by the company will be exposed to the risk of volatility in market price.
ii. Investors tendering as per acceptance ratio – In this case, tendered shares would be accepted by the company. Investor has the discretion to hold or sell the remaining shares in market at the prevailing price at that time. If they decide to hold the remaining shares, their cost of holding would come down substantially.
Also there would be separate category of investors who load the shares to the maximum as per their appetite (even more than 70 shares). The intent of such investors is not to tender their shares to company’s buy-back but to profit from the price differential when it’s converging with the buy-back price.
Disclaimer – This is not a recommendation to buy to sell. This is for educational purpose only. I am not a SEBI registered investment advisor.
Mukesh Verma
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Is the small shareholder limit upto Rs. 2 lacs or less then Rs. 2 lacs
Does any one know what was the acceptance ratio for small investors? I offered to be bought back 15 out of 20 of my shares and to my surprise all of them were accepted. Not sure having low holding makes a difference or for all small investors it would be same ratio.
It was 100%. Offered 65 shares, all accepted.
hi all,
Just want to know , what was the entitlement ratio in TCS buyback ?
As we all know the final acceptance ratio is 100%.
In Infosys, the entitlement ratio is around 29%, need to check the final acceptance ration.
in wipro, the entitlement ratio is around 70%.
Thanks.,