Infosys plans share takeover of up to Rs. 12,000 Cr, 3rd in 5 years
Infosys board is considering a share buyback proposal on Wednesday. That would be the Bengaluru-based IT services company’s third in less than five years.
Moreover, the size of the buyback could be 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 its cash or Rs. 13,000 crore, to shareholders in 2017-18 at Rs. 1,150 apiece. While in 2019, there was an Rs. 8,260 crore buyback at Rs. 800 apiece.
In the last year, Infosys has paid two dividends, aggregating Rs. 21.5 per share, BSE data shows. Infosys posted its best sequential growth in about nine years in the third quarter ended December. When it grew by 5.3% Clients demand a digital overhaul of their businesses to mitigate disruptions of the Kind they suffered. The pandemic is leading to a surge in orders for Indian IT services companies.
On the other side, the December quarter number led Infosys to raise its revenue guidance for the second time this fiscal and the company now expects to grow 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 utilized in a buyback program. At Friday’s close, the company had a market capitalization of over 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.
Buybacks are a tax-efficient way to return capital to shareholders:
In the last four years, IT companies have increased the pay-out ratio through a combination of dividend and buyback, as compared to large 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 crores in 2016 and Rs. 11,000 crores in 2017.
Through 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.