TCS share buyback will not affect rating: S&P

Ratings agency Standard & Poor (S&P) has said that Tata Consultancy Services (TCS) share buyback plan will not affect its rating. The company is currently rated A/Stable.

Abhishek Dangra and Ashutosh Sharma, analysts at S&P said, "TCS' operations continue to perform in line with our expectations and support the rating. We  believe TCS will maintain its net cash positive financial position, even if  its offer for share repurchase were to be fully subscribed."

In its board meeting held on February 20, TCS decided to buy back 5.61 crore equity or 2.85% of the company's total capital.  The company said that it will be buyback these shares at Rs 2850 per share thereby spending up to Rs 16,000 crore. 

S&P believes TCS'  modest acquisition spending and minimal capital spending will lead to significant free operating cash flows on its balance sheet.

TCS had net cash and cash equivalents of  Rs 38,600 crore as on December 31, 2016. 

The duo further added, "We believe Indian technology players will continue to grow at a slightly slower pace over the next two to three years due to technological disruptions, but we expect TCS to maintain its leadership position within the overall Indian technology space. "

On key IT players, S&P commented, "We expect Indian IT majors like TCS, Infosys Ltd., and Wipro  to continue to generate significant cash flows despite making modest acquisitions to augment their technological capabilities."