Winning Bizness Desk
Mumbai.Infosys, one of India’s leading IT firms, is likely to announce a major share buyback worth Rs 13,560 crore in its upcoming board meeting scheduled for September 11. This move, if approved, will be the company’s first buyback since 2022 and the fifth since its stock market listing in 1993. The announcement has already triggered investor optimism, pushing Infosys shares up by 5 percent to Rs 1,504 on the NSE.
What the share buyback means
A share buyback simply means the company will purchase its own shares from the market. This reduces the number of outstanding shares and can help raise the earnings per share, thereby potentially increasing share value. Infosys plans to use its strong cash reserves to fund the process. As of now, the company holds Rs 45,200 crore in cash and equivalents, making it easy to finance the buyback. The buyback amount will represent about 14 to 15 percent of Infosys’ net worth of Rs 95,350 crore.
Why companies opt for buybacks
Buybacks serve several purposes for companies and their investors. With fewer shares available, the value of each share can rise. They also allow the company to deploy surplus cash, instead of keeping it idle. Importantly, it signals confidence, as the company conveys that its shares are undervalued and it believes in strong future growth. Infosys’ move comes after three years, reflecting its intent to return value to shareholders at a time when the IT sector is under pressure globally.
Impact on retail investors
For small retail investors holding shares worth up to Rs 2 lakh, the buyback could provide a significant opportunity. According to SEBI rules, 15 percent of the buyback quota is reserved for retail investors. During Infosys’ earlier buyback in 2017, Rs 1,950 crore worth of shares were reserved for small shareholders out of the total Rs 13,000 crore program. However, experts advise investors to carefully evaluate the buyback price compared to the prevailing market price before deciding to participate.
Will the share price rise further
Typically, buybacks lead to a rise in share prices because of reduced supply and improved investor sentiment. Global brokerage Morgan Stanley has also suggested that Infosys may outperform the Nifty IT index in the coming 60 days. Yet, there are cautions too. In past cases, share prices have sometimes corrected after the buyback window closed. For example, after Infosys’ 2021 buyback, its shares fell by 3.3 percent. While the current plan reflects strong fundamentals and optimism, investors should weigh both potential benefits and risks.
Summary pointers:
1. Infosys board to consider Rs 13,560 crore share buyback on September 11.
2. This will be the company’s fifth buyback since its 1993 listing.
3. Infosys shares rose 5 percent to Rs 1,504 on NSE after news.
4. Company has Rs 45,200 crore cash reserves to fund the buyback.
5. SEBI rules reserve 15 percent buyback quota for retail investors.
6. Experts say buyback signals company confidence and can boost share value.
7. Past trends show post-buyback share corrections are also possible.
