For the fourth time since it got listed as a public company in June 1993, Infosys has announced its share buyback decision. The Bengaluru-based IT giant yesterday announced a Rs 9,300 crore share buyback scheme through the open market route.
For the uninitiated, ‘Share buyback’ is when a company re-purchases its own shares. It does so by paying its shareholders the market value per share and red-absorbing that portion of its ownership which was previously distributed among public and private investors. Companies generally do buybacks for various reasons, including company consolidation, equity value increase, and for looking financially more solid.
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Coming back to Infosys, the company, while announcing its Q2 numbers, also announced an interim dividend of Rs 16.5 per share. Infosys saw 11% growth in consolidated net profit to Rs 6,021 crore, while revenue climbed by 23.4% to Rs36,538 crore in Q2 of FY23 on a year-on-year basis.
“In line with the capital allocation policy, the board has announced an interim dividend of Rs 16.50 per share, an increase of 10% over FY 22 interim dividend and an open market share buyback of Rs 9,300 crore,” Infosys CFO Nilanjan Roy said at the end of the company’s board meeting, as per ET report.
The maximum size of the buyback of equity shares from the open market route through the Indian stock exchanges is that of Rs 9,300 crore, excluding buyback tax, at a price not exceeding Rs 1,850 per share. Infosys shares had ended at Rs 1,419.75 on BSE and at Rs 1419.90 on NSE yesterday. It surged around 5% today as well during morning trading.
Infosys plans to buy back over 5 crore shares, comprising approximately 1.19% of the paid-up capital of the company. “If the equity shares are bought back at a price below the maximum buyback price, the actual number of equity shares bought back could exceed the maximum buyback shares, but will always be subject to the maximum buyback size,” it said.
In its regulatory filing, Infosys said, “the Board approved a proposal for the Company to buyback its own fully paid-up equity shares of the face value of Rs 5 each from the equity shareholders of the Company (other than the promoters, the promoters group and persons in control of the Company).
It also mentioned that the maximum buyback size does not include any expenses or transaction costs incurred or to be incurred for the Buyback, such as, brokerage, filing fees, advisory fees, intermediaries’ fees, public announcement publication expenses, printing and dispatch expenses, applicable taxes such as buyback tax, securities transaction tax, goods and services tax, stamp duty etc. and other incidental and related expenses.
Based on the minimum buyback size and maximum buyback price, Infosys would purchase a minimum of 2.5 crore equity shares, the report mentioned.
Also Read: Infosys Increases Promotions & ESOPs To Retain Talent
Buyback Committee Constituted
For the buyback process, the company’s board has constituted a buyback committee, comprising the CFO, Deputy CFO, General Counsel and the Company Secretary of the company. Pre-buyback shareholding pattern shows that the promoter and promoter group held 13.11% stake in Infosys. The buyback scheme is subject to shareholders’ approval.
As per the ET report, Infosys said that the maximum buyback size is less than 15% of the aggregate of the total paid-up share capital and free reserves of the company as on September 30, 2022.
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Infosys’ Buyback History
Infosys has a payout policy to return 75% of its free cashflow over 5 years (FY20-FY24E) to shareholders. Regulations limit maximum buyback amount at 25% of net worth. Before this fourth share buyback was announced by Infosys yesterday, the IT giant has previously done so thrice before, all coming in last 5 years itself.
In December 2017, Rs 13,000 crore share buyback was done through the tender offer route. August 2019’s share repurchase worth Rs 8,260 crore was through the open market route. The last buyback was in 0ctober 2021 which was also through the open market route and sized at Rs 9,200 crore, as per the report.
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Dividend payout On November 10th
Infosys also announced an interim dividend of Rs 16.50 per share and has fixed October 28, 2022 as record date for interim dividend and November 10, 2022 as payout date. The total amount of interim dividend will be approximately Rs 6,940 crore, the company said in an exchange filing.
Also Read: Infosys Had Both Highest Hirings & Attritions In Q2 Of 2022
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