In a letter addressed to the Infosys Board on July 29 accessed by FE, the two former board members Pai and Balakrishnan, and another former employee DN Prahlad said, Infosys should immediately buyback its shares worth Rs 11,200 crore (which is roughly 40% of the existing cash and cash equivalents). The buyback should be at the 52-week high price of Rs 3,850 share.
The Infosys scrip touched R3,504.25 on BSE on Tuesday, showing a gain of 1.2% The cash reserves of the company at the end of first quarter of FY15 stood at Rs 29,748 crore.
Infosys should announce a buyback programme to the extent of 40% of the previous years net profit on a consistent basis, the letter said.
Infosys has not articulated its strategy for use of its cash effectively, so far. Given this massive net cash position and robust net income generation, Infosys is perhaps the most overcapitalised company in the Indian corporate history, from our perspective, the letter added.
We believe that the combination of the companys unprecedented cash levels, robust net income growth and tremendous borrowing capacity being a zero debt company, provides more than enough cash for any necessary ongoing strategic investments for innovation or M&A, it said.