4 Stocks that Could Announce Big Buybacks in 2024

The year 2023 has so far witnessed buybacks worth Rs 470.3 billion (bn) from 35 companies, almost double the amount buybacks garnered in 2022.

A few more companies including TCS and Somany Ceramics have announced buybacks worth Rs 171.25 bn, which will be closed this year.

With buybacks being a more tax-efficient solution than paying dividends, more companies are choosing this route.

In a share buyback, the company either cancels the shares it bought back or keeps them as treasury shares.

Since buybacks are not guided through a policy, companies announce a buyback only if they have excess cash.

With the year 2023 coming to a close, we have shortlisted some companies with high cash balances and low debt on their books that may announce a buyback in 2024.

Take a look...

#1 HCL Technologies

First on the list, we have HCL Technologies.

Formerly known as Hindustan Computers Limited, HCL Technologies is an Indian multinational information technology services and consulting company headquartered in Noida.

In the last three years, the company's revenue has grown at a company annual growth rate of 10.4%, driven by accelerated demand for digital transformation and technology programs. The net profit also grew at a CAGR of 9.9% during the same period.

In September 2018, the company bought back 36 million (m) shares at a price of Rs 1,100 per share. The company returned Rs 40 bn in buyback as part of its policy to return more than 50% of its net income to its shareholders.

At the end of financial year 2023, the company had a cash balance of Rs 62 bn and is debt-free.

Considering the cash lying on the books, and IT companies' love for share buybacks, HCL Tech could announce a buyback in 2024.

However, it could also pay a big dividend, considering its rich history of paying consistent dividends.

Since 2006, the company has declared 85 dividends in total and has consistently paid dividends during all quarters since the financial year 2014.

HCL Technologies Dividend History

Year	Dividend Per Share (Rs)
2013-2014	18
2014-2015	30
2015-2016	22
2016-2017	24
2017-2018	8
2018-2019	8
2019-2020	8
2020-2021	26
2021-2022	44
2022-2023	48
2023-2024	22

Data Source: BSE

For the financial year 2024, it has already declared two interim dividends of Rs 10 and Rs 12 each.

The five-year average dividend payout ratio stands at 46.3%. The dividend yield over the past five years has averaged 2.4%.

In the first two quarters of the financial year 2024, the company won 16 large deals worth Rs 3.2 trillion (tn). The strong pipeline of orders and the company's diversified client base will drive its growth in the medium term.

To know more, check out HCL Technologies' financial factsheet and latest quarterly results.

#2 Engineers India

Second on the list is Engineers India.

Established in 1965, Engineers India is a global engineering consultancy and EPC (engineering procurement and construction) company owned by the government of India.

It offers services in various sectors but has a primary presence in the entire oil and gas value chain.

In the last three years, the company's revenue has grown at a CAGR of 2% on account of high order inflow. The net profit of the company also grew at a CAGR of 9.6% during the same time.

In November 2020, the company announced a buyback of 69.8 m shares at Rs 84 per share.

This was primarily to meet the target of rewarding the shareholders through dividends or buybacks.

At the end of financial year 2023, the company's cash balance was Rs 10.2 bn. To add to this, it is a debt-free company.

This indicates a potential buyback in 2024.

Engineers India has paid dividends to its shareholders consistently since 2003.

Engineers India Dividend History

Year	Dividend Per Share (Rs)
2013-2014	6.5
2014-2015	5
2015-2016	4
2016-2017	3
2017-2018	4
2018-2019	4
2019-2020	5.15
2020-2021	2
2021-2022	3
2022-2023	3

Data Source: BSE

In the financial year 2023, it paid a dividend of Rs 3 with a dividend payout of 49% and a yield of 4.1%.

The five-year average dividend payout ratio stands at 56.8%. The dividend yield over the past five years has averaged 3.9%.

As of June 2023, the company's order book stood at Rs 81 bn, with the majority of the orders coming from consultancy projects.

Going forward, its strong order book and robust financial position will drive its growth in the medium term.

To know more, check out Engineers India's financial factsheet and latest quarterly results.

#3 Coal India

Next on our list is Coal India.

Coal India was one of the most unloved stocks due to its prolonged period of underperformance.

However, in the past 3 years, the company's performed has improved.

Despite lagging behind many multibaggers in terms of share performance, Coal India is one of the leading dividend payers and is known for making big dividend payouts to its shareholders.

It has consistently paid dividends to its shareholders since listing in 2010.

Coal India Dividend History

Year	Dividend Per Share (Rs)
2013-2014	29
2014-2015	20.7
2015-2016	27.4
2016-2017	19.9
2017-2018	16.5
2018-2019	13.1
2019-2020	12
2020-2021	16
2021-2022	17
2022-2023	24.25

Data Source: BSE

In the last five years, the average dividend payout ratio and dividend yield stood at 56.3% and 8.9%, respectively.

The company's high cash balance, low debt, and strong financials have helped in paying consistent dividends.

In the last three years, the revenue has grown at a CAGR of 19.4%, driven by higher demand for power. The net profit also grew at a CAGR of 30.3% during the same period.

Although the company has debt on its books, its debt-to-equity ratio and interest coverage ratio are 0.1x and 56.5x, respectively, indicating low leverage and high liquidity.

At the end of June 2023, the company's net cash and cash equivalents were more than Rs 490 bn.

Considering such a high cash balance, robust financials, and low debt, the company can either buy back the shares from the market or reward its shareholders with a high dividend.

Coal India's last buyback was in 2019 when it purchased 44 m shares at Rs 235 per share from the market.

Although renewable energy is given importance across the country, coal is here to stay as it forms a critical part of India's economy.

With Coal India being the largest coal supplier to the Indian power sector, we believe a growing demand for power will drive the company's growth in the medium term.

To know more, check out Coal India's financial factsheet and latest quarterly results.

#4 Mazagon Dock Shipbuilders

Last on the list is another government company, Mazagon Dock Ship.

The company is engaged in manufacturing warships, submarines, cargo and passenger ships for the defence sector. It also undertakes ship repairing activities for its clients.

In the last three years, the company's revenue has grown at a CAGR of 22.6%, driven by a healthy order book. The net profit also grew by a CAGR of 32.1% during the same period.

As of 31 March 2023, it had no debt on its books.

The company's cash balance at the end of financial year 2023 was Rs 132.8 bn, making it one of the most cash-rich midcaps in India.

With such a high cash balance and zero debt, there are high chances of a buyback in 2024.

The company was listed on the stock exchange in 2020, and since then, it has not announced a share buyback.

However, it has paid consistent dividends.

Mazagon Dock Shipbuilders Dividend History

Year	Dividend Per Share (Rs)
2020-2021	7.24
2021-2022	8.73
2022-2023	15.96

Data Source: BSE

The three-year average dividend payout ratio stands at 31.4%. The dividend yield over the past three years has averaged 3.2%.

As of June 2023, the company's order book was around Rs 40 bn, which is expected to be executed by the financial year 2026.

It has all major contracts, such as Project-17A frigates, Project-15B destroyers, and Project-75 submarines, in its order book.

In addition, it has signed a Memorandum of Understanding (MOU) with Germany's Thyssenkrupp to participate in an Indian Navy submarine tender worth approximately US$ 5.2 bn.

Apart from this, Mazagon Dock has also entered into multiple agreements with private businesses. These agreements aim to boost defence exports from US$ 1.5 bn to US$ 5 bn by the end of the financial year 2024-25.

All this indicates that the company's growth prospects are quite bright.

To know more, check out Mazagon Dock Ship's financial factsheet and latest quarterly results.

List of Other Companies with High Cash Balances and Low Debt

Mazagon Dock Shipbuilders Dividend History

Company Name	Cash and Bank balance (Rs bn)
Life Insurance Corporation of India	383.5
General Insurance Corporation of India	232.8
Hindustan Aeronautics Ltd.	203.1
Ircon International Ltd.	47.9
Tata Consultancy Services Ltd.	45.4
Hindustan Unilever Ltd.	44.2
Oracle Financial Services Software Ltd.	34.5
LTIMindtree Ltd.	26.4
Indraprastha Gas Ltd.	26.3
PI Industries Ltd.	21.3
Abbott India Ltd.	19.4
Indian Railway Catering And Tourism Corporation Ltd.	19.3
Havells India Ltd.	18.6
Pfizer Ltd.	18.6
Avenue Supermarts Ltd.	13.7

Data Source: Ace Equity

So there you go...a list of potential companies that could be strong contenders for a buyback in 2024.

When companies repurchase their shares, it could indicate favorable long-term prospects by signaling that the shares are undervalued. Many investors only consider investing in companies that execute large buybacks... like TCS and Infosys.

Overall, when you combine it with other financial metrics, buybacks are a good indicator of a company's long-term prospects and a way to get a bigger slice of the pie without paying extra for it.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...