1. Why LIC giving Infosys a boost despite stock crash

Why LIC giving Infosys a boost despite stock crash

The Infosys board had also announced buyback of shares worth Rs 13,000 crore on August 19, at a price of Rs 1,150 apiece.

By: | Mumbai | Updated: August 24, 2017 4:38 AM
Despite a steep fall in the share price of Infosys and the huge erosion in its market capitalisation, following the resignation of its managing director and CEO Vishal Sikka last Friday, state-run Life Insurance Corporation of India (LIC) is understood to have left its holding in the Infosys stock untouched. (PTI)

Despite a steep fall in the share price of Infosys and the huge erosion in its market capitalisation, following the resignation of its managing director and CEO Vishal Sikka last Friday, state-run Life Insurance Corporation of India (LIC) is understood to have left its holding in the Infosys stock untouched. In two sessions on Friday and Monday, the Infosys stock lost close to Rs 34,000 crore of market value. On Wednesday, the stock closed at Rs 894.50, up by 1.98% over Tuesday’s closing. The Infosys board had also announced buyback of shares worth Rs 13,000 crore on August 19, at a price of Rs 1,150 apiece. Senior officials in LIC, indicated, on condition of anonymity, that the insurer had not offloaded any share in the IT bellwether even though the turmoil in the company threatens to disrupt operations until a new CEO is in place.

While other institutional investors such as mutual funds, which collectively hold around 8.3% in Infosys, are believed to have sold some stock, no fund is known to have cashed out completely. This is despite the fact that brokerages are lowering profit growth estimates for the current year. A couple of funds are understood to have done some bottom fishing. On Tuesday, the stock had closed marginally higher at Rs 877.15. “We are awaiting some clarity on the management and given the correction in the stock, this could be an opportunity,” said a senior executive at LIC. According to the latest data from Bloomberg, LIC holds 7.03% in Infosys. Apart from LIC, ICICI Prudential Life Insurance also holds 1.33% in the stock.

Domestic mutual fund houses which hold around 8.3% in Infosys are also waiting it out. HDFC AMC and ICICI Prudential AMC hold 2.24% and 1.42%, respectively in Infosys, suggests the latest data from Bloomberg. Reliance Capital Trustees and SBI Funds Management have exposure in Infosys at 1.06% and 1.04%, respectively. “We haven’t decided whether to sell the stock or buy more, but our future decision would be taken after management meeting. We are hopeful that, management would meet fund houses in the coming weeks and some clarity would emerge,” said a CEO of a leading fund house on condition of anonymity. Several other funds houses like UTI Mutual Fund, Aditya Birla Sun Life Mutual Fund, Franklin Templeton Mutual Fund, Kotak Mahindra Mutual Fund, L&T Mutual Fund and DSP BlackRock Mutual Fund holds under 1% in Infosys as on June 2017, says the data from Value Research.

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