Infosys Rs 13,000 crore share buyback: promoters to cash in

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Updated: August 29, 2017 4:02:53 PM

Infosys said in a regulatory filing yesterday that some of the members of the promoter and promoters Group will be participating in the proposed Rs 13,000 crore buyback.

Infosys, Narayana Murthy, IT major, CLSA, Nandan Nilekani , Tata Consultancy Services, IT major, R SeshasayeeSome of promoters will be participating in the proposed Rs 13,000 crore buyback. (Image:Reuters)

The Indian IT bellwether Infosys announced yesterday that some of the promoters would participate in the upcoming share buyback of the company. Nandan Nilekani, in his first investor concall after taking over as the non-executive chairman of the board of Infosys, said that the buyback plans remain unchanged. On August 19, Infosys had announced that it will buyback 11.3 crore shares or 4.92 percent of equity capital at Rs 1,150 apiece, spending Rs 13,000 crores.

The promoters – N R Narayana Murthy, Nandan Nilekani, S Gopalakrishnan, S D Shibulal and K Dinesh – together hold 12.75% stake in Infosys at the end of June, 2017, according to filings with the stock exchanges.

In a regulatory filing, Infosys said, “We would like to inform…that some of the members of the promoter and promoters Group of the company have communicated their intention to participate in the proposed buyback.”

Analysts say that the buyback provides a very good opportunity for the retail investor to tender their shares. Speaking to FE Online, Ashish Chopra from Motilal Oswal had told last week , “The buyback provides a very good opportunity. The recent correction has made the buyback attractive. The more the price corrects, more alluring the buyback will be.” Another analyst, who did not wish to be identified had told FE Online that the stock buyback provides a safe haven for retail investors for want of other opportunities, as the markets currently look stretched.

Buybacks are a better way to reward shareholders, as paying dividends attracts a hefty dividend distribution tax, said the analyst.

Many brokerage houses have turned cautious of the stock, after Vishal Sikka’s resignation. Quantum Securities told CNBC TV18 that Vishal Sikka’s resignation is an ‘unfortunate event’. Sanjay Dutt of Quantum Securities told the news channel,” Sikka’s resignation at Infosys was an unfortunate event; Wouldn’t buy Infosys right now”. The shares have lost more than 6.5% of their value in the year so far. Nirmal Bang Securities continues to remain cautions on the stock for the next 1-2 year period. The brokerage house told CNBC TV18 yesterday,” We continue to remain cautious on 12-24 month returns on Infosys.” Nirmal Bang says that Vishal Sikka’s resignation does not bode well for Infosys. A major reason for worry is that Vishal Sikka’s performance was excellent with respect to top clients, and Nirmal Bang believes that it would be difficult to replicate that performance. Hence, the brokerage house is skeptical about the the company’s growth prospects.

The shares lost more than 1.5% since the previous close, and closed at Rs 926.75 on Tuesday at NSE.

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