Four stocks that could see big buybacks in 2024
₹470.3 billion, almost doubling the total value of share buybacks in 2022. A few more companies, including TCS and Somany Ceramics, have also announced buybacks worth ₹171.25 billion that will be executed this year. As buybacks are a more tax-efficient way of rewarding shareholders than paying dividends, an increasing number of companies are choosing this route.
When a company announces it will buy back a certain percentage of its shares, it first fixes a price and a record date – the deadline for shareholders to apply for the buyback offer. Once the offer period ends, the company reviews and finalises buyback applications and settles payments. After buying them back, the company either cancels the shares or retains them as treasury shares.
Buybacks are not guided by policy and companies announce them only if they have excess cash. With this in mind, we have shortlisted companies with high cash balances and low debt that could announce buybacks. Formerly known as Hindustan Computers Limited, HCL Technologies is a multinational information technology services and consulting company headquartered in Noida.
In the last three years its revenue has grown at a company annual growth rate (CAGR) of 10.4% thanks to increased demand for digital transformation. Net profit grew at a CAGR of 9.9% over the same period. In September 2018 the company bought back 36 million shares at ₹1,100 each.
The ₹40 billion buyback was in line with its stated goal of returning more than half of its net income to shareholders. At the end of FY23 the company had a cash balance of ₹62 billion and was debt-free. Considering the amount of cash lying on its books, the company could well announce a buyback in 2024.
Read more on livemint.com
