Tata Consultancy Service, or TCS, India’s largest IT services firm is considering a share buy back, the company informed the National Stock Exchange.
“We will like to inform you that the Board of Director will consider a proposal for buyback of equity shares of the company at its meeting to be held on February 20,” the company said in its letter to the bourses.
TCS’ decision of share buyback comes at a time when the IT industry is under pressure of losing revenue from its clients in the US, which makes for 65% of revenue of $155 billion industry, under American president Donald Trump’s protectionism measures.
Earlier in the week, Tata Sons chairman N Chandrasekaran, who is the former CEO of TCS, told a television channel the decision of buyback came from suggestions from investors to distribute large amount of cash to its shareholders.
TCS has a cash pile of Rs 43,100 crore, which is nearly 10% of the company’s market capitalisation.
The firm’s decision of buyback comes in quick succession of rival Cognizant announced that it would return $3.4 billion to its shareholders over the next two years.
Share buyback and paying to shareholders in form of dividends helps in two things. It stabilises the stock price, and shows the management and owners confidence in the company, especially during a slowdown.
After the news, TCS’ stock price picked moment, and was trading 1.48% up, while the Sensex had a muted growth of 0.56%.
TCS and Cognizant are not the only two companies. Infosys has also faced pressure in the past for share buyback.
Former Infosys employees TV Mohandas Pai and V Balakrishnan had tried to buyback $1.8 billion of Infosys shares in 2014, just after Vishal Sikka took over the reigns of the company as its CEO.
The IT industry is already under pressure of finding business outside of the US. According to Nasscom’s chairman CP Gurnani, who is also the CEO of Tech Mahindra, the industry might grow between 6% to 10% in 2017-18.