HCL Technologies’ announcement of the big fat acquisition of $1.8 billion (Rs 12,700 crore) IBM software products, the largest purchase by an Indian IT services company till date, shifts focus on reserves and surplus of other top Indian information and technology (IT) companies. As on September 30, 2018, HCL Tech had huge reserves and surplus on their books, which, so far, has mostly been used for share buybacks.
At the close of second quarter of FY19 HCL Tech had Rs 40,757 crore reserves and surplus on its books. A part of it may be used to fund an all cash-deal acquisition of select IBM software products, announced last week, to enhance its capabilities. But market experts were not sure of the HCL Tech-IBM deal going through. It’s too early to say the deal will work and will be executed due to several challenges like its size and valuation, said an equity analyst.
Top IT companies’ reserves and surplus as of September 30 need to be studied in light of HCL Tech’s acquisition to understand the pipeline of such big acquisitions.
“Tata Consultancy Services (TCS), Infosys and Wipro are best positioned from the perspective of acquisition,” said Anita Gandhi, whole-time director, Arihant Capital Markets.
As on September 30, TCS had Rs 75,773 crore reserves and surplus on its book. It has been using reserves and surplus mostly to buy back shares in the recent past than for acquisitions.
TCS board on June 15 announced Rs 16,000 crore share buyback. Last buyback was of 7.62 crore shares (1.99 per cent) of its equity through a tender offer at Rs 2,100 apiece.
Infosys had Rs 62,972 crore as reserves and surplus on its books as on September 30, 2018. Infosys also has not too many acquisitions of the size announced by HCL Tech. In November 2017, Infosys for the first time in its 36-year history announced share buyback of Rs 13,000 crore.
Wipro had Rs 50,788 crore as reserves and surplus on its books as on September 30. Wipro also announced Rs 11,000 crore share buyback in November 2017.