Infosys Announces Major 18,000 Crore Buyback Following 20% Annual Decline
The Infosys board has made a significant move by approving an ₹18,000 crore share buyback, the largest in the company’s history. This decision marks the fifth buyback since 2017 and will be executed through a tender offer at a price of ₹1,800 per share. The buyback involves the purchase of 10 crore equity shares, representing approximately 2.4% of Infosys’s total paid-up equity capital. The initiative comes amid a challenging market environment, with Infosys shares experiencing a nearly 20% decline year-to-date.
Details of the Buyback
The approved buyback plan will see Infosys repurchase shares at ₹1,800 each, totaling ₹18,000 crore. This buyback will be conducted through a tender offer, allowing shareholders to sell their shares back to the company. The board has established a buyback committee that includes key executives such as the chief financial officer and the chief legal officer. The record date for identifying eligible shareholders will be announced in due course. This buyback is compliant with regulatory limits, as it does not exceed 25% of the company’s paid-up capital and free reserves, based on the latest audited financial statements for the June quarter.
Market Context and Implications
The decision to initiate a buyback comes at a time when Infosys has faced significant stock price pressure, with shares down nearly 20% since the beginning of the year. The broader economic landscape remains uncertain, particularly in sectors like logistics, consumer products, and manufacturing. As a result, many clients are prioritizing cost optimization. Analysts from Kotak Securities have noted that this buyback reflects the company’s recognition of its undervalued stock, prompting management to utilize surplus cash effectively. The firm highlighted that buybacks allow for the deployment of excess cash without committing to long-term capital expenditures.
Historical Context of Buybacks
This latest buyback is part of Infosys’s ongoing strategy to return value to shareholders. In 2022, the company executed an open market share buyback worth ₹9,300 crore, alongside an interim dividend of ₹6,940 crore. This marked the fourth buyback in less than six years. In 2021, Infosys repurchased shares valued at approximately $1.2 billion (around ₹9,200 crore) and distributed a dividend of $850 million (₹6,400 crore). Over the past few years, Infosys has returned around ₹88,400 crore, or 85% of its cumulative free cash flow from FY20 to FY24, through dividends and buybacks, aligning with its capital allocation policy.
Future Outlook
Looking ahead, Infosys has committed to maintaining its policy of returning about 85% of its free cash flow over a five-year period, which will be achieved through a mix of semi-annual dividends, buybacks, or special dividends. In the last fiscal year, the company returned approximately ₹17,814 crore, which accounted for 51.6% of its free cash flow for that year. This ongoing commitment to shareholder returns reflects Infosys’s strategy to balance growth with shareholder value, even amid fluctuating market conditions.
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