Infosys shares rise 2% as Board approves Rs 18,000 crore buyback

Infosys Ltd shares climbed 2.33 per cent in Friday's trade to hit a high of Rs 1,544.65 after the IT services giant approved its largest-ever share buyback worth Rs 18,000 crore.

The Bengaluru-headquartered company said the buyback will be carried out via the tender route at Rs 1,800 per share, a 19.24 per cent premium to Thursday's closing price of Rs 1,509.50. At this scale, Infosys will repurchase around 2.41 per cent of its outstanding equity. The move beat market expectations of a Rs 10,000–14,000 crore buyback and marks the firm's fifth such initiative.

With this, Infosys' cumulative buybacks since its 2017 corporate action have risen to Rs 57,760 crore. The company will buy back nearly 10 crore shares at Rs 1,800 apiece, or 2.41 per cent of equity, at a 19 per cent premium over the prevailing market price. Previous buybacks were announced at premiums of 18–30 per cent, covering 1.19–4.92 per cent of equity.

Until FY19, Infosys distributed 70 per cent of free cash flows to shareholders. Later, the company revised its policy to return about 85 per cent of free cash flows through a mix of semi-annual dividends, buybacks and special dividends, subject to approvals. Between FY21 and FY25, it extinguished 11.62 crore fully paid-up shares of face value Rs 5 each.

Infosys' last buyback, between December 2022 and February 2023, saw it repurchase 6.04 crore shares at an average Rs 1,539.06 per share, amounting to Rs 9,299.98 crore. Before that, in October 2021, it bought back 5.58 crore shares at an average Rs 1,648.53 under a Rs 9,200 crore programme via the open market. In 2019, the company repurchased 11.05 crore shares at an average Rs 747.38, spending Rs 8,260 crore. Its first buyback in December 2017 was a Rs 13,000 crore tender offer at Rs 1,150 per share, covering 11.30 crore shares.

Under a tender offer buyback, companies repurchase a fixed number of shares at a set price higher than the market price, within a limited window.

Commenting on the development, market expert Kush Ghodasara told Business Today: "Not just Infosys, but all major IT stocks have underperformed in the past two to three years. The buyback ratio is crucial. Don’t trade just for corporate actions, but if you are already an investor with gains in Infosys, I recommend tendering shares in the buyback. I expect the IT sector to remain sideways to weak over the next six to eight months."