Infosys share price surged to a new record high level, rising 1.6 per cent to Rs 1,575 apiece in intraday deals on BSE, as the IT firm began a Rs 9,200-crore buyback on Friday. The stock has surpassed its previous high of Rs 1,568.35 apiece, touched in the previous session. In the Nifty IT index, along with Infosys, shares of Tata Consultancy Services (TCS), Tech Mahindra, Coforge, and Mindtree have also hit their respective 52-week highs on Friday. The IT bellwether has proposed to buyback shares at a maximum Rs 1,750 apiece, a premium of over 11 per cent on the current market price.
Upon completion of the buyback at the maximum price, Infosys will buy back 5.25 crore equity shares. “We advise investors to stay invested, as we see further upside for the stock from the current price level. We expect the cloud, cybersecurity market, and data analytics to drive Infosys’ digital portfolio to grow in FY21,” Ashis Biswas, Head of Technical Research, CapitalVia Global Research, told Financial Express Online. Digital revenue now accounts for half of total revenue, and it will continue to expand rapidly at the cost of core legacy revenue. “Further, we expect the digital business will expand and generate higher margins than the company’s average of 24 per cent,” he added.
Infosys stock has zoomed 127.25 per cent in just one year, more than doubling the investor money. In traded volume terms, 2.5 lakh shares have exchanged hands on BSE, and a total of 86.82 lakh units on NSE so far in the trade. This is the third buyback by Infosys in a span of five years. Earlier in December 2017, the company completed a buyback of 11.3 crore equity shares at a price of Rs 1,150 per share for Rs 13,000 crore. In August 2019, Infosys bought back 11.05 crore shares for an average Rs 757.38 per equity share under its Rs 8,260 crore buyback offer. So far this calendar year Tata Consultancy Services (TCS) and Wipro have completed their share buybacks.
Ashis Biswas also said that the stock buyback will help the company repay surplus cash to its owners. In the long run, the buyback is anticipated to enhance return on equity and profits per share by lowering the equity base, leading to a long-term rise in the value of members, said an analyst.
The company in an exchange filing informed that the last date for the buyback (whichever is earlier) would be December 24, 2021 (6 months from the date of the opening of the buyback) or when the company completes the buyback by deploying the amount equivalent to the maximum buyback size. Analysts said that weakening in rupee, strong fundamentals, new deal wins coupled with low impact of Covid-19 has led Infosys moving to a new all-time high. “Technically, Infosys is very overbought and investors should book profit at current levels and re-enter at 1450-1480 levels for higher targets of 1630 in the coming weeks,” AR Ramachandran, Co-founder & Trainer, Tips2Trades, told Financial Express Online.
Besides, Accenture reported strong third-quarter earnings, increasing its FY21 revenue growth guidance by 300bp (midpoint) on better than expected demand environment. Analysts at Motilal Oswal Financial Services believe that Accenture’s third quarter results suggest a further acceleration in industry growth. “We see its 3QFY21 delivery and commentary as a positive read-across for our Indian IT Services coverage as it indicates continued robust demand in key industries,” they said. The brokerage firm maintains its positive stance on the sector on the expectations of sustained growth rates for a longer period of time. “Infosys and HCL Technologies remain our preferred picks within Tier I IT,” it said.
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