Sources told TOI that the size of the buyback could be between Rs 10,000-12,000 crore, and at a price of Rs 1,650-1,670 apiece. On Friday, the Infosys stock closed at Rs 1,441 on the BSE.
Infosys returned one-third of cash or Rs 13,000 crore ($2 billion) to shareholders in 2017-18 at Rs 1,150 apiece. In 2019, there was a Rs 8,260 crore buyback at Rs 800 apiece. In the last one year, Infosys has paid two dividends, aggregating Rs 21.5 per share, BSE data shows.
When TOI asked Infosys about the latest buyback programme, the company said it was in the silent period prior. This is the regulator-imposed stretch of time preceding quarterly results and board meetings that refrains the company from making disclosures of material information.
Infosys posted their best sequential growth in about nine years in the third quarter ended December, when it grew by 5.3%.
Clients’ demand for a digital overhaul of their businesses – to mitigate disruptions of the kind they suffered during the pandemic – is leading to a surge in orders for Indian IT services companies.
The December quarter numbers led Infosys to raise its revenue guidance for the second time this fiscal and the company now expects to grow between 4.5-5% for the full year, up from 2-3% guided earlier.
As of December 2020, Infosys’s balance sheet showed consolidated cash and current investments worth about Rs 33,157 crore. Sebi rules allow up to 25% of a company’s net worth to be utilised during a buyback programme.
At Friday’s close, the company had a market capitalisation of Rs 6.1 lakh crore, making it the fourth most valued company in India, after Reliance Industries, TCS and HDFC Bank and ahead of HUL, HDFC and ICICI Bank.
James Friedman of Susquehanna Financial Group (SFG) said the timing may be potent too. “Clearly Infosys is overcapitalized. But this is a dynamic time in the industry, when Infosys is proliferating new platforms and standing up new large contracts. Buyback suggests to us their belief they have the tools necessary to win.”
Buybacks are a tax-efficient way to return capital to shareholders. In the last four years, IT companies have increased the payout ratio through a combination of dividend and buyback, as compared to largely dividends in the period prior to this.
Since 2017, among the IT leaders listed in India, TCS and Wipro both had three buybacks each, while HCL Technologies had two. Wipro did its largest share buyback, worth $1.7 billion, in 2019. It did a buyback of Rs 2,500 crore in 2016 and Rs 11,000 crore in 2017.
During the nine months ended September last year, Cognizant returned $1.2 billion to shareholders through $833 million in share repurchases, and $362 million in dividend payments.