After its buyback offer started, Infosys shares were the subject of attention. The market share-wise fourth-largest corporation was trading essentially unchanged on Thursday. The Infosys share buyback, which will cost 9,300 crore, started on December 7 and will last until June 6, 2023. According to a regulatory filing, Infosys repurchased equity shares on the first day of the offer for close to 202 crore rupees.

At roughly 10 am, Infosys shares traded at $1,606.70 per share, a slight increase from the BSE closing price of $1,605.05. The market capitalization of Infosys is close to 6.77 lakh crore at the current price.

Infosys disclosed in a regulatory filing on Wednesday that it has repurchased 25,000 shares on the BSE and 12,23 lakh shares on the NSE at an average cost of 1,615.54 per share. 12.48 lakh shares were purchased in total on the opening day on stock exchanges, amounting to about 201.62 crore at the average price. The transaction’s broker was Kotak Securities.

The entire amount of equity shares being repurchased by Infosys would be more than 5.02 crore, totaling $9,300 crore at a face value of $5 per share. The share buyback price shouldn’t go over $1,850.

The corporation will use its free reserves to carry out this infosys buyback.

Infosys recommended using at least 50% of the maximum buyback, or $4,650 crore (or 50% of the overall buyback size of $9,300 crore).

Infosys had a free cash flow of 4,752 crore as of September 30, 2022, down from 5,106 crore in Q1FY23. In addition, its combined cash and investments increased from 34,854 crore in Q1FY22 to 38,921 crore in Q2FY23.

The buyback, according to an announcement from Infosys, will assist the business in paying out extra cash to its shareholders.

In general, the repurchase is anticipated to raise return on equity through the distribution of cash and increase earnings per share by lowering the equity base over time, which will increase members’ value over the long term. Additionally, the buyback offers shareholders the chance to expand their stake in the company as a whole.

How to participate in Infosys share buyback?

There is no specific involvement necessary because the buyback is off the open market, according to ICICI Direct’s blog post from last month on the Infosys share buyback.

Anyone with stock and Infosys shares in their Demat account is qualified to take part in the buyback. All a shareholder needs to do to participate in the infosys buyback is let their broker know which equity shares they want to sell. When the corporation places a buy order under the buyback plan, the broker will subsequently place a sell order at the same time.

According to ICICI Direct, the trade will only be carried out at the offer price or less if the shareholder’s price matches the company’s buy order.

Infosys used a postal poll to ask shareholders for approval for a Rs 9,300 crore share buyback between November 3 and December 2.

On October 13, the Infosys board announced a share buyback of Rs 9,300 crore through the open market, at a price of no more than Rs 1,850 per equity share.

“The Company must get the consent of its members for the buyback either a postal ballot for a special resolution or at a general meeting where members can cast their votes electronically. In light of this, the Company is requesting your consent for the Buyback via this postal ballot notice “the document stated.

The board determined that over a five-year period, it would return about 85% of the free cash flow cumulatively through a combination of semi-annual dividends, share buybacks, special dividends, etc.

Where are Infosys shares headed?

The Infosys shares buyback were recommended by AUM Capital in a research report dated November 30. Infosys has accelerated transaction win momentum through engagement with deal advisors, consulting companies, and private equity participants, according to the stock brokerage’s statement.

Further, the brokerage’s note explained that in the recently released Q2FY23 results, strong deal wins across the Digital and Automation verticals had given it an advantage over other listed peers. Due to its industry-leading automation capabilities and the client-level shift toward cost-reduction initiatives, it is seeing an acceleration in the implementation of its growth strategy.

In Q2FY23, the firm reported a consolidated net profit of 6,021 crore, up 11% year over year, and revenue of 36,538 crore, up 23.43% year over year. Infosys posted outstanding Q2 results in the quarter, with sequential increase of 4.0% in constant currency and year-over-year growth of 18.8%. In constant currency terms, all business segments experienced double-digit yearly growth. Digital revenue, which made up 61.8% of total revenues, increased by 31.2% in constant currency.

Additionally, Infosys’ operating margin for the quarter rose 140 bps sequentially to 21.5%. The quarter’s large transaction TCV was strong at $2.7 billion, the highest in the previous seven quarters.

The management of Infosys revised its EBIT margin guidance to a range of 21-22% while increasing its range of expected revenue growth for FY23 from 14-16% to now 15-16%.

In addition, the note from AUM Capital on Infosys stated that “while there are signs of a slowdown in some pockets, such as mortgage, discretionary retail, telecom, and Hi-tech segment, they are discretionary related and are not expected to prove to be much of a concern over the long term and would stabilise once the macroeconomic situation improves.”

Infosys stressed the importance of always identifying new, relevant talents and developing capabilities around them. It constantly searches the globe for promising acquisition prospects of specialised and cutting-edge businesses for this reason.

As a result, AUM Capital advised a buy with a target price of $1937 over the next 9 to 12 months.

History of Infosys Buyback

According to Infosys’ payout policy, it would return 75% of its free cash flow to shareholders over a five-year period (FY20-FY24E). Maximum buyback amounts are capped at 25% of net worth by regulations.

Since its listing in June 1993, Infosys has announced four share buybacks. This one would be the fourth.

Through a tender offer, a share buyback worth Rs 13,000 crore was carried out in December 2017. The open market was used for the Rs 8,260 crore share repurchase in 2019. The most recent buyback, which was likewise conducted in the open market, took place in October 2021 and had a size of Rs 9,200 crore.

Dividend

Additionally, Infosys declared an interim dividend of Rs 16.50 per share, setting October 28, 2022 as the record date and November 10, 2022 as the delivery date.

The business announced in a filing with the exchange that the entire amount of the interim dividend will be close to Rs 6,940 crore.