On Monday, 6 September 2021, the IT major Infosys announced that it had almost completed its shares buyback program. Earlier, the Infosys board had approved an Rs. 9,200 crores buyback program to commence from 25 June, buying back shares at a maximum price of Rs. 1,750 apiece.
The buyback committee will meet again on 8 September 2021 to decide if they want to close this program. According to a recent regulatory filing, Infosys has utilised 99.99% of the maximum buyback size in addition to transaction-related expenses.
Let’s dive into the details of this Infosys buyback program and the company’s current financial state.
Infosys Board got approval for a buyback program on 14 April 2021 and received the shareholders’ nod on 19 June 2021. It then made a public announcement through various newspapers that it intended to buy back equity shares from the open market via stock exchanges.
Infosys commenced selling a maximum number of 5,25,71,428 equity shares with a buyback size of Rs. 9,200 crores. The company would buy back 1.23% of its paid-up equity share capital as of 31 March 2021 at a maximum price of Rs. 1,750 apiece.
According to this proposal, actual number of shares sold could exceed the maximum size if shares were bought below a maximum buyback price. But this amount that Infosys would purchase would always be less than the maximum buyback size. Infosys would use up at least 50% of their funds earmarked for the buyback, a total of Rs. 4,600 crores.
Infosys utilised its free reserves and other permitted sources for the funds required for this buyback. Following all terms of Regulation 16 (ii) of the Buyback Regulations, it was not extended to promoters, promoter groups, or persons in charge of the company. Moreover, the buyback was implemented via NSE and BSE.
The share buyback’s objective was to return surplus cash to all members and enhance shareholder value over a long-term period. In addition, it would improve returns on equity and earnings per share.
Infosys appointed Kotak Mahindra Capital Company as the manager of the buyback, while KFintech Private Limited was appointed as the registrar.
The recent announcement to close the buyback program follows the proposed timeline. As per this, the last date for the buyback would be 24 December 2021 or when the company utilised its maximum buyback size.
Infosys is a global leader in technology, consulting, outsourcing, and next-generation digital services. For over four decades, the company has helped clients in over 50 countries to create and execute digital transformation strategies. It provides a range of solutions for digital marketing, commerce, and workplace services.
The company used its technology infrastructure and early start to gain success even during the second wave of Covid-19. The company’s prior investment in US localisation helped it successfully transition to a work-from-home trend amidst travel restrictions.
Infosys registered a 13.1% revenue growth to Rs. 26,311 crores year on year from Rs. 23,267 crores last year. In April, the company reported a 17.5% increase in net profits totalling Rs. 5076 crores for the March 2021 quarter.
Infosys’ constant currency growth was at 9.6% for Q4 on year on year basis, while its full-year growth was at 5%. Digital business has increased 34% YoY in the fourth quarter and represents as much as 51.5% of the company’s total revenue.
As a result of the buyback, Infosys’ shares hit a new record of Rs. 1755 on the BSE in August 2021. The stock outperformed the market in July 2021, gaining 13% after raising its revenue growth guidance.
Investors looking for excellent returns may want to be on the lookout for buybacks and opt-in time. They will also need to remember to look at various other factors like the company’s track record, profitability, growth, etc., before investing.
Investors with Infosys shares could participate in this buyback offer from 25 June 2021 to 24 December 2021.
The Infosys buyback offer has an aggregate size of not more than Rs. 9,200 crores with a price of Rs. 1,750 per share.
Buybacks offer an opportunity for shareholders to exit their positions at attractive returns. If individuals expect their shares to keep performing even better, they can hold their positions to improve earnings.
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