Becoming the fourth information technology firm to announce a buyback of shares during this quarter, HCL Technologies on Monday said that its board has approved a buyback of up to 3.50 crore shares worth Rs 3,500 crore. IT firms, with large amounts unused cash reserves, are opting for share buybacks to return the surplus cash to their shareholders.
In a BSE filing, HCL Tech said, “…the Board of Directors of the company…have approved the buyback of up to 3,50,00,000 fully paid up equity shares of the company of face value of Rs 2 each (representing 2.48 per cent and 2.45 per cent of the fully paid up equity shares of the company outstanding as on March 31, 2016 and as on date respectively) at a price of Rs 1,000 per equity share payable in cash for an aggregate amount not exceeding Rs 3,500 crore”. HCL Tech shares ended 0.23 per cent lower from their previous close at Rs 863.30 on the BSE.
The buyback amount is 16.39 per cent and 13.62 per cent of the fully paid up equity share capital and free reserves (including securities premium account) as per the latest audited standalone and consolidated balance sheet of the company, respectively, for the financial year ended March 31, 2016, the company said. At present, HCL promoters and promoter group holds 59.69 per cent stake in the company.
Tata Consultancy Services, US-based Cognizant Technology Solutions, and Mphasis Ltd have also announced share buybacks. While a number of analysts have supported the move by IT companies to return the cash to their stockholders, some have argued that the companies could have invested these funds for supporting innovation in the sector.