Infosys promoters opt out of Rs 18,000 crore share buyback; here is why

Infosys Ltd promoters, including founder Narayana Murthy and chairman Nandan Nilekani, have decided not to participate in the company's Rs 18,000 crore share buyback, the IT major said in a regulatory filing on Wednesday.

"Since the promoters and the promoter group of the Company have declared their intention to not participate in the Buyback, Equity Shares held by them have not been considered for the purposes of computing the entitlement ratio," Infosys stated.

The promoters and their family members collectively hold 13.05 per cent, or 542 million outstanding shares, as of September 30, 2025.

Explaining the rationale behind the promoters' decision, Ved Jain, former president of the Institute of Chartered Accountants of India (ICAI), wrote on LinkedIn that the recent tax amendments have made the buyback less favourable for resident shareholders.

"On the face of it, the buy-back is quite attractive as the company will be offering Rs 1,800 per share as against market price of Rs 1,472, and there will be an apparent gain of Rs 328 per equity share. However, the tax implication arising on such buy back of share in the case of Resident Individual shareholders is going to be far more than the premium being offered by the company under proposed buy back scheme. That is why the promoters are opting out of the buy back," Jain noted.

He mentioned that after the amendment introduced by the Finance (No. 2) Act, 2024, "any payment made by a company on purchase of its own share from a shareholder in terms of section 68 of the Companies Act, 2013 is to be deemed as ''dividend income'."

Under the revised tax structure, Jain said, "the entire amount of Rs 1,800 received by the shareholder on such buy back of shares will be considered as dividend income in the hands of the shareholder." With an effective tax rate of 35.88 per cent for individuals earning over Rs 1 crore, "such shareholder will be liable to pay tax of Rs 646 on this amount of Rs 1,800 received... The net amount, thus, in the hands of the shareholder will be Rs 1,154 only."

He further compared this with the scenario of selling shares in the open market: "Assuming that such shareholder had purchased the share at Rs 100 per share, the tax on capital gain of Rs 1,372, applying this tax rate of 14.95 per cent, will be Rs 205 only, with the result that the net amount post tax... will be Rs 1,267, as against Rs 1,154 in case of buyback. Thus, the net loss to the shareholder... will be Rs 113 per share despite getting a premium of Rs 328 over present market price."

Jain also pointed out that non-resident shareholders would benefit significantly as "dividend income is taxed at concessional rate of 5 per cent to 20 per cent in view of Tax Treaty. Since promoters are opting out, the number of shares available for buy back for non-residents will get substantially increased."

Following the announcement, shares of Infosys rose 5.01 per cent to touch a day high of Rs 1,545.70 in Thursday's trade.