When IT firms returned cash to shareholders

India’s top four IT services firms — Tata Consultancy Services, Infosys, Wipro and HCL Technologies — returned Rs 43,500 crore to shareholders through share buyback this year as they struggled to deploy cash to grow their business while facing their worst crisis in nearly a decade.

 

This is in addition to the $1.8 billion by Cognizant’s share buyback in two tranches as part of its commitment to return $3.4 billion to shareholders over two years under pressure from activist shareholder Elliott Management. The year also saw IT services firms face the reality of clients slashing budgets for traditional services and shifting it to digital and cloud. Most Indian firms, who earn four out of five dollars from traditional services, were caught unprepared by the shift and began hurriedly investing in acquiring capabilities in newer domains. Indian IT firms, being conservative and wont to run their businesses frugally, had billions of dollars in cash reserves which they did not use to make large acquisitions, with the exception of Wipro. Investors in turn started questioning these firms to return cash to shareholders. In May, TCS, the country’s largest IT player, launched its Rs 16,000-crore share buyback, the largest in Indian stock market history.

 

This was followed by HCL Technologies with a Rs 3,500 crore offer.

 

In December, Wipro completed its Rs 11,000-crore share buyback, in which Azim Premji Trust sold 2.73 per cent stake for more than Rs 5,700 crore. The trust is the philanthropic arm of Premji, which is involved in education in the country. Infosys completed its Rs 13,000 crore share buyback last week, the first in the company's 36-year history, in which the promoter group increased share marginally to 12.9 per cent.



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