Infosys shares gain as buyback programme begins

Shares of IT-giant Infosys rose nearly 1% on stock exchanges as the company's share buyback programme commenced on Wednesday. 

At 1329 hours, Infosys was trading at Rs 925.35 higher by Rs 4 or 0.40% on BSE.

On October 11, Infosys said, "We wish to inform you that the buyback committee has approved and fixed Wednesday, November 01, 2017 to be the record date for determining the entitlement and the names of equity shareholders to whom the letter of offer will be sent and will be eligible to participate in the buyback."

Total buyback offer consists of 11,30,43,478 equity shares fully paid-up having face value of Rs 5 each at a floor price of Rs 1,150 per piece. 

Maximum amount of funds required for the buyback will not exceed Rs 13,000 crore. 

Kotak Mahindra Capital Company and JP Morgan India Private Limited are appointed as the managers of the buyback offer. 

Infosys earlier said, "Offer Size is 20.51% of total fully paid-up share capital and free reserves of the company on a standalone basis, which is within the stipulated limit of 25% of the aggregate of the fully paid-up share capital and free reserves of the Company as on June 30, 2017."

From the buyback, Infosys will return surplus cash to its shareholders in proportion to their shareholding, thereby enhancing the overall return to shareholders.

Also, this will help Infosys to improve return on equity and Earnings Per Share by reducing the equity base. Diluted EPS of Infosys stands at Rs 16.29 as of September 30, 2017. 

M. D. Ranganath, CFO of Infosys during Q2FY18 result said, “We have taken several steps during the quarter towards our capital allocation policy covering `13,000 crore share buyback, coupled with interim dividend of `13 per share for enhancing shareholder returns.”

Liquid assets including cash and cash equivalents and investments were at Rs 41,392 crore in Q2FY18 compared to Rs 39,335 crore in Q1FY17 and Rs 38,773 crore in Q4FY17. 

Apurva Prasad and Amit Chandra, analysts HDFC Securities said, "While better capital allocation (buyback) and the uptick in operations are positives, leadership transition and the risk of senior attrition can hinder growth."