DNA Money Edit: IT majors need to spend on reskilling staff, nurture innovation

India’s cash-rich information technology (IT) giants are on a shareholder-pleasing spree. After Tata Consultancy Services (TCS) completed a mega Rs 16,000 crore share buyback of equity shares from investors at Rs 2,850 per share and Infosys board identified an amount of up to Rs 13,000 crore to be paid out to shareholders, through dividend and share buyback, it’s the turn of Wipro. India’s third-largest IT firm on Thursday announced a buyback offer of Rs11,000 crore.

Infosys was in the news when its promoters such as Mohandas Pai and Kris Balakrishnan demanded a share buyback. Blackstone, the private equity company, offered a buyback to investors in MphasiS after it acquired a majority stake in the company last year.

Surely, share buybacks improve earnings per share and return surplus cash to shareholders while supporting the share price. As on June 30, Wipro had ‘cash and cash equivalents’ of Rs 5,432 crore on its books and ‘investments’ of Rs 31,772 crore, totalling Rs 37,204. Among Indian IT companies, TCS, which had a cash pile of over Rs 43,000 crore, has already completed its buyback programme successfully.

Wipro said the buyback is in line with its philosophy to deliver efficient returns to shareholders. During April-June quarter, the company had allotted bonus equity shares -- one bonus share for every one share held -- to its shareholders.

As the growing tribe of IT firms wants to keep their respective shareholders happy and return surplus cash to them, there are concerns about their growth. Amid tough market conditions, these companies should not lose focus from nurturing new revenue sources by reskilling their employees and creating an ecosystem of innovation through mergers and acquisition.