Infosys Share Buyback Offer is Good, Know Why

Infosys the second largest exporter of IT services had announced the share buyback offer way back in April,2017 with an aim to pull down the investors demand and reduce surplus cash reserves.

Here are the details, but before that, let’s understand what is buyback and how does it benefit the company.

What is buyback of shares?

For people who are new to financial jargons, buy-back of shares means repurchase of shares by the company. It is done to reward investors, promote investor confidence, to check volatility, etc.

Why is Infosys opting for a share buy back?

Infosys has announced the buyback decision because of massive investor’s pressure who wants to utilize the cash reserves worth USD 6 billion either through buy back of shares or through dividends. The pressure mounted on the company has been increased after the tech companies like Cognizant, HCS and TCS announced the mega buy-back offers to return surplus cash to the investors

“The board has identified an amount of up to Rs 13,000 crore to be paid out to shareholders during financial year 2018, in such a manner (including by way of dividend and/or share buyback), to be decided by the board, subject to applicable laws and requisite approvals, if any.”

What is the Buyback Date?

Infosys buyback offer will start on November 30,2017 and it will end the same on 14 December. It will be the first buy back offer in the company’s 36 year old long history.

“Infosys is expected to see the IT player buying back more than 11.30 crore shares for a price of Rs 1,150 apiece according to a statement by Infosys.”

Infosys share buyback of Rs 13,000 crore will have 11,30,43,478  equity shares with a face value of Rs 5 from the registered shareholder as on the record date i.e. November 1,2017. As per the reports, the share of founders Narayana Murthy and Nandan Nilekani will sell their shares in buyback process.

How to apply for Infosys share buyback?

The buyback offer will be available through the tender. The company will determine your entitlement based on number of equity shares you hold. The entitlement will be calculated based on share price and retail shareholding pattern as per the record date.

Should investors opt for share buyback?

On the face of it, the offer seems to be a luring offer, but when we dive into the details, we see the company is struggling to maintain and grow. Firstly, the global IT market is witnessing a tectonic shift from IT outsourcing to cloud, artificial intelligence, predictive analysis and automation. Then there is an opposition of big economies like the USA and the UK, as they prefer to hire a local talent. The exit of Vishal Sikka from the top-notch position is another set- back to the company. Apart from that, recently Infosys has also viewed a number of other high-profile exits.

If that was not sufficient, the internal discord between the management and the promoters are making the matters worse. Even two anonymous complaints have been filed to the SEBI regarding the impropriety in the acquisitions made by the company. The anonymous complaints also highlighted the falling standard of the company and promoters distrust.

With all these fights and discords in we would recommend hold the share at your own risk. But from the future perspective the stock is a safe bet. It has recently bagged a contract from the government to configure the editing facility in the GST network, so that the traders can file the return and the technical analysis by FINVIZ rates this stock at 2.90 which means an investor can hold this stock safely.