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An employee of Tata Consultancy Services (TCS) works inside the company headquarters in Mumbai March 14, 2013.Reuters file

Tata Consultancy Services (TCS), India's largest IT services exporter, on Monday approved buyback of 5.61 crore equity shares at a price of Rs 2,850 per share, aggregating into Rs 16,000 crore. The TCS stock closed at Rs 2,506, up 4.08 percent, on Monday on the Bombay Stock Exchange (BSE). The news comes a few days after Cognizant Technology Solutions (CTS) announced a $2.7 billion plan to buyback shares starting from the current quarter (Q1, CT 2017).

"Tata Consultancy Services Ltd has informed BSE that the Board of Directors of the company at its meeting held on February 20, 2017 has approved a proposal to buyback up to 5,61,40,351 equity shares of the company for an aggregate amount not exceeding Rs. 16,000 crore...being 2.85 percent of the total paid up equity share capital, at Rs. 2,850 per equity share," it said in a regulatory filing to the BSE. (hereinafter referred to as the "Buyback Price").

The buyback is proposed to be made from the shareholders of the company on a proportionate basis under the tender offer route using the stock exchange mechanism in accordance with the provisions contained in the SEBI (Buy Back of Securities) Regulations, 1998 (hereinafter referred to as the "Buyback Regulations") and the Companies Act, 2013 and rules made thereunder," it added.

Welcome decision, says Angel Broking

"The buyback of the shares, is a good indication of the under valuation of the stock in the markets and also is good given that the cash yields are running low and earning yield in IT industry has improved on back of the underperformance of the stock," Sarabjit Kour Nangra VP Research- IT at brokerage Angel Broking said in a note.

Infosys will now feel the heat to initiate a similar buyback after TCS. Former board member Mohandas Pai had already raised the question a few days ago. "Cognizant To Appoint 3 Directors, Return $3.4 Billion To Shareholders When will Indian IT follow?" had Pai tweeted.

Last April, Wipro bought back 40 million shares at Rs 625 per share, or about 1.6 percent of its paid-up capital.