India’s largest software company, TCS, confirmed this morning it would consider doing a buyback on February 20, in line with recent calls by investors that IT companies look for ways to return excess cash to shareholders.
The company today informed exchanges about its intention but this was confirmed by outgoing TCS CEO N Chandrasekaran in an exclusive interview with CNBC-TV18 last evening.
In the interview, Chandrasekaran, who is slated to take over as Tata Group chief, said the company had received suggestions from investors over the need for certainty on dividend policy along with share buyback to distribute the cash.
“These two comments have come from investors and we will discuss it in the board,” he said.
Without giving any further details on the issue in an interview with CNBC-TV18, he said TCS has been building up cash to meet its requirements, especially in the case of any mergers and acquisitions, and the excess sum has been shared consistently with shareholders.
Chandrasekaran said that over the years, TCS has been increasing its dividend payments to shareholders.
The move comes as investors have started pressuring IT companies — many of which have accumulated a lot of free cash, and are believed to be struggling to make use of it in a challenging environment — to return cash to shareholders.
NASDAQ-listed Cognizant was the first IT company to recently confirm it would consider a buyback. Since, Infosys has been in the eye of the storm, partially because its ex-CFOs Mohandas Pai and V Balakrishnan have called on the company to return excess cash.
In the CNBC-TV18 interview, Chandrasekaran was asked who would take over as the company’s new CFO as the incumbent Rajesh Gopinathan will replace him as CEO. “We have an internal candidate, we will announce that candidate. We have to go through the board. So, in the next board meeting, that will get formalised,” he said.
Not worried about H-1B, IT slowdown
On the issue of impact on Indian IT industry in the wake of proposed tightening of H-1B visas norms and hike in fees by the US, Chandrasekaran said that for TCS, it will not be a big issue.
TCS has worked in an environment where visas were difficult to get. “USD 1,00,000 minimum wage in the US will not be a problem,” he pointed out.
Allaying fears in the IT industry about a slowdown, he said the industry was robust and the demand environment was strong.
In meetings with various clients from across industries, he said he did not come away with any concern.
“I am not in the doom and gloom club,” Chandrasekaran said.
On the way ahead for TCS, he said Gopinathan and his team understand the industry and the company does not need any major management or strategic changes because of his elevation to Tata Sons.
The way TCS operates will not change, he clarified, adding however that the company will shift to a higher gear on cloud and automation.
“We already operate in cloud space. We have a clear view on what we want to do in the cloud space. We have done a lot of work in automation, we want to see how we can take it to the next level,” Chandrasekaran added.