Infosys Share Buyback: Promoters Opt Out
- Infosys, IndiaS second-largest IT services provider, announced a share buyback program on October 22, 2024, valued at approximately ₹1,800 crore (roughly $216 million USD as of this date).
- As of September 30, 2024, the promoters and promoter group, including family members, collectively hold 13.05% (542 million) of the company's outstanding shares.
- This marks the fifth share buyback by Infosys in the last decade.
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Published October 22, 2024, at 4:40 PM
Overview
Infosys, IndiaS second-largest IT services provider, announced a share buyback program on October 22, 2024, valued at approximately ₹1,800 crore (roughly $216 million USD as of this date). The company intends to repurchase 100 million shares at an average price of ₹1,800 per share, representing 2.41% of its total outstanding equity.
As of September 30, 2024, the promoters and promoter group, including family members, collectively hold 13.05% (542 million) of the company’s outstanding shares. Key individual shareholders include Narayana Murthy (0.36%), Nandan Nilekani (0.98%), and Sudha Gopalakrishnan, wife of co-founder Kris Gopalakrishnan, who is the single-largest promoter shareholder with a 2.3% stake. This buyback will affect all shareholders, but the promoter group’s overall percentage ownership will be slightly reduced.
Details of the Buyback
This marks the fifth share buyback by Infosys in the last decade. The previous buyback occurred in 2022, involving an open market purchase totaling ₹9,300 crore at an average price of ₹1,850 per share, encompassing 60 million shares. Livemint reported on the 2022 buyback. The current buyback is expected to be completed within a specified timeframe, details of which will be announced separately.
Future Capital Allocation Strategy
Infosys has signaled a commitment to returning capital to shareholders. Effective from financial year 2025, the company plans to return approximately 85% of its free cash flow cumulatively over a five-year period. This will be achieved through a combination of semi-annual dividends and/or share buybacks or special dividends, subject to legal and regulatory approvals. This policy demonstrates confidence in the company’s future cash generation capabilities.
Impact and Analysis
Share buybacks are frequently enough viewed positively by investors as they can increase earnings per share and potentially boost the stock price.By reducing the number of outstanding shares, the company’s profits are distributed among fewer shares, leading to a higher EPS. However, the effectiveness of a buyback depends on various factors, including the company’s valuation and alternative investment opportunities.