Vishal Sikka’s resignation from India’s bellwether information technology services company Infosys is unlikely to impact the buyback plan of the company. What is more, the analysts are not sounding the alarm bell as yet, and maintain that the buyback share price will remain at up to Rs 1,100-1,200. On Tuesday, India’s second largest information technology services company Infosys Ltd has said it will consider a proposal for buyback of equity shares of the company later this week at its board meeting on Saturday, 19 August.
Yesterday, research and brokerage firm CLSA had said that the tender offer buyback will be at a premium of 10-20% to Wednesday’s closing price of Rs 1,021. However, since then shares of the Infosys plunged by over 9.5% on Friday and closed at Rs 923.15 after company’s CEO and MD Vishal Sikka resigned from the post today. Sikka resigned barely three years after he was appointed as the CEO.
Analysts maintain that the buyback price will not be impacted. Speaking to FE Online, Rajat Sharma from Sana Securities said, “the buyback share price is likely to be upto Rs 1,200. Today’s correction in the price is unlikely to impact the announcement.” He also believes that the shares may bounce back early next week. Yesterday, the analyst had expressed that based on the recent trend in the industry such as TCS announcing the buyback at the 10-15% range, Infosys is also likely to follow suit.
Another analyst who did not wish to be identified, says that that while there may be some short term correction in the share price, the long-term prospects of the stock remain attractive. He too concurred that the buyback share price would be in the range of Rs 1,100-1,200.
The analysts raised concerns about the company’s troubles in finding a new CEO. “It will be difficult to replace somebody like Vishal Sikka, who has excellent technical know-how,” said the analyst requesting anonymity.
R Seshasayee, the Chairman of Infosys told ET Now, “There will be no change to our buyback plan. None of the things set in motion are going to be stopped.”
Infosys has a massive $5.25 billion (nearly Rs 34,000 crore) stash of cash, and it is looking for ways to return a part of it to the shareholders, in absence of other productive uses for it. Earlier April, Infosys said that the management has identified $2 billion (or about Rs 13,000 crore) to be paid to shareholders via share buybacks or dividends.
The company said it expects to pay out up to 70% of free cash flows. At the time, Infosys also announced a dividend of Rs 14.75 per share. Infosys did not disclose details of the proposed share buyback in the intimation sent to the stock exchanges on Wednesday, however, previous news reports have pegged its size to be at around Rs 16,000-17,000 crore. Rajat Sharma believes that post buyback, the company may resort to inorganic acquisitions to utilise the excess cash.