Infosys Share Price Rally Ahead of Mega Buyback
Infosys witnessed a significant surge in its share price on Wednesday, with the stock jumping over 3% as investors reacted positively ahead of the company's largest-ever share buyback program. The IT services giant saw its shares rally as much as 3.84% to ₹1,542.80 per share on the BSE, reflecting market optimism about the capital return initiative.
Comprehensive Buyback Details
The much-anticipated share buyback program worth ₹18,000 crore is scheduled to open for subscription on Thursday, November 20, and will close on November 26. The record date for determining eligible shareholders was set as November 14, meaning investors who held Infosys shares as of this date can participate in the buyback program.
Infosys plans to repurchase 10 crore fully paid-up equity shares of face value ₹5 each, representing up to 2.41% of the total paid-up equity share capital. The company has fixed the buyback price at ₹1,800 per share, which represents a significant premium of 18-20% to pre-announcement levels.
Category-wise Allocation and Entitlement Ratio
The buyback is strategically divided into two categories: the reserved category for small shareholders and the general category. The reservation for small shareholders will be 15% of the number of equity shares that the company proposes to buy back, or their entitlement, whichever is higher.
A small shareholder is defined as someone holding equity shares with a market value not exceeding ₹2,00,000 as on the record date. Infosys has 25,85,684 small shareholders eligible under this category.
The entitlement ratio for the reserved category is set at 2:11, meaning 2 equity shares for every 11 equity shares held. For the general category, the buyback ratio is 17:706. Importantly, Infosys promoters and promoter group, including Nandan M Nilekani and Sudha Murty, have decided not to participate in the buyback program.
Expert Analysis and Investor Considerations
According to Abhinav Tiwari, Research Analyst at Bonanza, the buyback reflects strong capital return discipline and management confidence in medium-term cash flows. The company is funding this massive buyback entirely through internal cash and reserves, underscoring its robust free cash flow generation.
Tiwari highlighted that Infosys' FY25 capital allocation framework commits to returning approximately 85% of cumulative free cash flows over five years via dividends and buybacks, signaling disciplined capital management.
However, investors need to consider the taxation implications post-Budget 2024, where buybacks are now taxed as deemed dividend, making the payout fully taxable at the shareholder's slab rate. For investors in the 30%+ surcharge bracket, the net benefit from the premium sharply reduces, often making a market sale near the buyback price more efficient.
From a fundamental perspective, Infosys appears to be in a transition phase with healthy deal wins and revenue visibility, though not exhibiting high growth characteristics. The buyback is expected to partially offset slower EPS growth by reducing share count and improving Return on Equity (ROE).
Infosys Buyback History
This marks Infosys' fourth share buyback program. The company announced its first buyback in 2017, purchasing 11.3 crore shares for ₹1,150 per equity share, totaling approximately ₹13,000 crore. The second buyback in 2019 was worth ₹8,260 crore, followed by the third in 2021 valued at ₹9,200 crore. In 2022, Infosys announced a share buyback of ₹9,300 crore via the open market route.
At 12:45 PM, Infosys share price was trading 3.46% higher at ₹1,537.00 per share on the BSE, demonstrating sustained investor interest in the company's capital return strategy.
