HCL Technologies may buy back shares worth Rs 5,000 Cr at Rs 1,150 apiece

HCL Technologies, India’s fourth-largest software services company, may buy back shares for about Rs 5,000 crore, offering Rs 1,100-1,150 per share, two people familiar with the development told ET.
The promoters—Shiv Nadar and his family – are expected to participate in the buyback, said one person. Details of the plan are expected to be firmed up on July 12, when the board will discuss the proposal.
“The Rs 5,000-crore buyback will be at a premium of 17-20% to the closing price last Monday, when it had announced the intent of buyback,” the person said. Last year, HCL Tech bought back shares for Rs 3,500 crore at Rs 1,000 apiece, a 17% premium over the prevailing trading price at that time.
The company, with a market capitalisation of Rs 138,551 crore, aims to maximise the return of cash to shareholders. Rewarding shareholders with special dividend would have attracted dividend distribution tax, the person said. In a buyback, the shares are tendered through the stock exchange and attract securities transaction tax, which is negligible compared to dividend distribution tax.
Tata Consultancy Services, India’s largest IT company, declared a Rs 16,000 crore share buyback programme last month, offering to buy back shares at a premium of over 15% at Rs 2,100 per share.
The HCL Tech promoters, with a holding of over 60%, will end up mobilising over Rs 3,000 crore through this route, without diluting their stake.
“As the buyback will be accepted on a prorate basis, the shareholding pattern of the company will not change,” the second person said. An HCL Technologies spokesperson declined to comment on the matter. An email sent to the company didn’t get any response.
“HCL’s cash and equivalents have reduced from Rs 12,700 crore as the company spent more on acquisitions and partnerships,” Motilal Oswal said in a note, adding that the buyback may come at Rs 1,100 per scrip.
IDBI Capital expects the buyback price at a premium of 14% compared with 17% last year. HCL Technologies share have advanced 10.7% to Rs 980 so far in 2018, compared with a 7% increase in the benchmark S&P BSE Sensex Index. On Wednesday, it closed at 995.05 on the BSE, gaining 1.6%.

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