Infosys announces its biggest share buyback program ever worth ₹18,000cr
What's the story
Infosys, India's second-largest IT company, has announced a share buyback worth ₹18,000 crore. This is the company's biggest buyback program to date and its first in three years. The decision was approved by the board yesterday. The repurchase will be carried out through a tender offer route, with up to 100 million fully paid-up equity shares of face value ₹5 each being bought back at ₹1,800 per stock.
Shareholder benefits
Buyback subject to shareholder approval
The buyback program, which is subject to shareholder approval, will be available to all equity shareholders as on a record date. This is yet to be announced. The IT giant had over ₹42,000 crore in cash and cash equivalents and more than ₹20,000 crore in free cash flow in FY23. The buyback will be funded from these reserves as per its capital allocation policy of returning 85% of free cash flow over five years through dividends and repurchases.
Historical context
IT major's buyback nearly double last year's repurchase
The current buyback is nearly double the ₹9,300 crore repurchase in 2022 when shares were bought back through open market route at a maximum price of ₹1,850 per share. The 2019 buyback was worth ₹8,260 crore while Infosys had also done a ₹13,000 crore program in 2017. This move comes amid weak global demand impacting IT stocks. Analysts expect this strategy will improve return ratios and earnings per share by reducing equity base and providing near-term support to stock prices.
Market alignment
Buyback price a premium to stock's recent trading range
Infosys's decision to initiate a buyback is in line with other Indian IT companies like TCS and Wipro, which have collectively spent over ₹1 lakh crore on share repurchases in the last decade. The buyback price of ₹1,800 per share is a premium to the stock's recent trading range. The company's stock is now trading at ₹1,377.70 per share, up 0.41% from its previous close.