Tech Mahindra shares gained nearly 3 percent in the morning on February 18 ahead of its board meeting to consider share buyback proposal later this week.
The stock was quoting at Rs 807.20, up Rs 6.50, or 0.81 percent on the BSE, at 0940 hours IST.
“The meeting of the board of directors of the company is scheduled on February 21 to consider a proposal to buyback the fully paid-up equity shares of the company,” the software services provider said.
Hence, the trading window for transacting in the securities of the company would remain closed from February 16 to February 23.
While maintaining overweight call on the stock with a price target at Rs 830, global brokerage house Morgan Stanley said the buyback could be its first-ever and positive for sentiment.
Buyback over and above regular dividend payout would help boost return ratios, it added.
As the company has networth of Rs 19,300 crore in FY18 and cash of around Rs 6,500 crore on its books, Motilal Oswal said there could be two option with the company while considering buyback proposal.
One is the company can buy back shares worth Rs 1,930 crore—10 percent of networth—(3.8 percent of equity) without shareholder approval.
The second option could be to buy back shares worth Rs 4,800 crore—25 percent of networth—(9.5 percent of equity) with shareholder approval.
“The latter scenario is unlikely, considering it consumes around 3/4th of cash, and Tech Mahindra’s acquisitive strategy,” Motilal Oswal said.
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