Question

Find an example of a company that recently initiated a stock buy-back program, give a brief discussion of the situation, and how the stock has fared since.

Answer 1

Tata Consultancy Services, the largest IT company in India, went with a buy back offer in 2017 of 5.6 crore equity shares which is about 3 % of its total equity.

The buy back price was fixed at Rs. 2850 per share. The stock gained about 10% since the announcement of buy-back. Most of the IT company stocks have been going low over a period of three years. Hence, since the buy back price was attractive, the buy back program was oversubscribed. It was a great exit opportunity since buy backs are usually done when company's growth rate slow down.

After the buy back program, the stock of TCS has been steadily going up. It has declared one final dividend and three interim dividends since. The current tradind price is close to Rs. 3400, upper limit.

Comparison with its peers like Infosys and Wipro also suggests that the company has performed very well after the buy-back. The buy-back program has given a growth stabilty, which was much needed.