Infosys has announced a share buyback worth Rs 18,000 crore, which will involve purchasing 10 crore shares at an average price of Rs 1,800 per share. This move is expected to boost investor confidence, and large IT companies like TCS and Wipro are also likely to consider buyback offers.
Share Buyback Offer: Bengaluru-based Infosys announced a share buyback worth Rs 18,000 crore on Thursday, wherein 10 crore shares will be repurchased at an average price of Rs 1,800 per share. This price is 19.3% higher than its recent closing price of Rs 1,509.50. Market experts believe that this move will increase investor confidence and may also prompt large IT companies such as Tata Consultancy Services (TCS) and Wipro to embark on buyback offers. According to analysts at Morgan Stanley and CLSA, TCS and Wipro could be potential candidates, considering their past buybacks and current market conditions.
Infosys's Past Buyback History
Infosys has undertaken share buybacks multiple times in the past. In 2017, Infosys repurchased 11.3 crore shares at an average price of Rs 1,150, spending Rs 13,000 crore. In 2019, the company bought back 11.05 crore shares at Rs 747 per share for Rs 8,260 crore. In 2021 and 2022, Infosys also conducted share repurchases with investments of Rs 9,200 crore and Rs 9,300 crore, respectively.
The objective of all these actions has been to return a maximum portion of the company's free cash flow to investors. Infosys has clarified that it plans to return approximately 85 percent of its cash through interim dividends, buybacks, and special dividends over the next five years.
Impact on Market and Investors
According to senior market analysts in Mumbai, Infosys's buyback is a very positive signal. This move will help boost investor confidence and prevent a decline in the stock market. Given the current volatility in the IT sector and the lack of b triggers for better stock performance, this buyback holds special significance.
Abhishek Pathak, Vice President at Motilal Oswal Financial Services, stated that the primary purpose of a buyback is to return cash to shareholders, not necessarily to signal anything about the business cycle. He also mentioned that large IT companies offer share buybacks every 18-24 months, implying it is a regular process.
Indication for TCS and Wipro
Analysts believe that Infosys's move will also serve as an inspiration for companies like TCS and Wipro. Analysts at CLSA noted that buybacks act as a confidence-building measure in a demand-weak environment. Past buybacks by TCS have shown that the company's share price received technical support from the initial announcement until the buyback closure.
According to a Bloomberg report, analysts at Morgan Stanley had previously commented that the timing of the buyback is 'interesting' and signals stability. It has been more than 12 months since the last buybacks by TCS and Wipro, making them likely candidates for the next potential buyback.
