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MOSL: Morning India (18/June/18): 1. TCS (Announces buyback 2. Dr Reddy's Labs (Receives approval for gSuboxone); 3. Media (BARC investor meeting) 4. KEC International

MOrning India (18/June/18): 1. TCS (Announces buyback: To return ~40% of cash to shareholders); 2. Dr Reddy's Labs (Receives approval for gSuboxone); 3. Media (BARC investor meeting) 4. KEC International

 

Today’s top research idea

TCS – Announces buyback: To return ~40% of cash to shareholders

• TCS Board approved the buyback of 1.99% of paid-up equity (~76m shares) at INR2,100, implying total return of INR160b (following a special resolution through a postal ballot).
• The buyback is proposed to be made under the tender offer route. This amounts to ~38% of the company’s INR426b cash balance and ~18% of net worth.
• The buyback should result in 2% accretion to EPS from a reduction in the share count. Other income foregone would be to the tune of INR12-13b, which would result in an adverse EPS impact of ~2.5%, implying net EPS decline of ~50bp.
• However, given the reduction in networth, the RoE is likely to improve by 2pp.

Piping hot news

DoT may give conditional nod to Vodafone, Idea merger today

• The Department of Telecommunications (DoT) is set to give conditional approval to the merger of Vodafone India and Idea Cellular in the next couple of days, which will close the largest M&A deal in the sector and bring together India's second and third largest telcos to create the country's largest carrier.