Infosys Launches ₹18,000 Crore Share Buyback Programme in India

Infosys Limited, a leading Indian IT services provider, is set to initiate a significant share buyback programme worth ₹18,000 crore, commencing on Thursday, November 20, and concluding on Wednesday, November 26. The company's plan, which received overwhelming approval from shareholders on November 6, allows for the repurchase of up to 10 crore fully paid-up equity shares at a fixed price of ₹1,800 each.

Eligible shareholders include those who held Infosys shares as of the record date, November 14. The buyback will be conducted through a tender offer on a proportionate basis, enabling existing shareholders to participate in this financial initiative.

Overview of the Buyback Programme

The share buyback aims to repurchase 10 crore shares, which represents approximately 2.41% of Infosys' paid-up equity share capital. The fixed buyback price of ₹1,800 per share reflects a premium of 19% over the trading price on the day the offer was announced, and a 21% premium compared to the closing price the day before.

Promoter Participation

Notably, the promoters of Infosys, including co-founders Narayan Murthy, Nandan Nilekani, and Sudha Murty, have opted not to participate in this buyback. If the offer is fully subscribed, the promoter shareholding is expected to increase to 13.37%, while the retail shareholding will slightly decrease to 86.63%.

Impact on Voting Rights

The changes in shareholding patterns resulting from the buyback could influence the voting rights of the promoters and related groups, which is an important consideration for shareholders.

Shareholder Approval

The buyback proposal garnered significant support from shareholders, with an impressive 98.81% voting in favour of the initiative. This reflects strong investor confidence in Infosys' strategy and financial health.

Entitlement Ratio

The entitlement ratio for the buyback is structured differently for various categories. For the reserved category, the ratio is set at 2:11, meaning shareholders can tender two shares for every 11 they hold. For the general category, the ratio is 17:706, which provides a clear guideline for eligible shareholders on how many shares they can offer for repurchase.

Analyst Insights

Market analysts have commented on the potential impact of the buyback on Infosys' share price. Nilesh Jain from Centrum Broking suggested that the stock could reach ₹1,550-1,600 in the short term, recommending that investors acquire shares ahead of the record date to take advantage of the buyback opportunity. Neeraj Dewan, a market expert, noted that the current valuations are more attractive than in previous buyback rounds, indicating a different market scenario this time around.

Past Buybacks

This marks the fourth buyback by Infosys since 2017. Previous buyback initiatives included ₹13,000 crore in 2017, ₹8,260 crore in 2019, and ₹9,300 crore in 2022. These historical actions reflect the company's ongoing commitment to returning capital to shareholders and managing its financial resources effectively.

Long-Term Strategy

Infosys aims to enhance shareholder value through this buyback, signalling a commitment to maintain a robust dividend policy. The company plans to return approximately 85% of its free cash flow over a five-year period through a combination of dividends and share buybacks.

Challenges and Strengths

Despite facing various challenges, such as a slowdown in discretionary technology spending and regulatory uncertainties in the United States, Infosys maintains a strong operational foundation. The company boasts a healthy deal pipeline and steady cash flows, which are crucial for future growth as technology budgets recover and artificial intelligence adoption accelerates.

Current Share Performance

Following the announcement of the buyback, Infosys shares experienced a notable increase, rising by as much as 3.78% to reach a high of ₹1,542.70 on the National Stock Exchange (NSE). This uptick reflects positive market sentiment surrounding the buyback initiative and the company's strategic direction.

In conclusion, the upcoming share buyback programme by Infosys is a significant event for investors, providing an opportunity to participate in the company's financial decisions while potentially benefitting from an increase in share value as the market reacts to this substantial corporate action.