Infosys today announced a Rs. 13,000 crore buyback offer, which is at a substantial premium to Friday's closing of Rs 923 on the NSE. This may cheer investment sentiments when the stock opens for trade on Monday, given that it is way above the current market price. This is despite Vishal Sikka's exit from the company which is claimed to come as no surprise. The board of Infosys calls it a misguided campaign by the company's co-founder Narayana Murthy.
In the beginning of this FY, the IT major had said that the company would pay back Rs. 13000 crore or $2 billion via share buyback or dividends in the FY 2017-18. After the payout, the company's cash reserve which currently stands over $6.1 billion shall come down by one-third.
The brokerage firm Edelweiss Securities is of the view that the buyback offer shall provide downside support to the Infosys scrip. Meanwhile another IT major HCL Technologies has also approved the buyback offer of Rs. 3500 crore.
Should you tender your shares in the offer?
It would be better to opt for the buyback offer, given the huge premium to the market price. This is also because nothing much is going to change structurally given the tough environment and the prevailing conditions at Infosys. Margin squeeze and client spends are unlikely to be too great going forward. While the benchmark indices are substantially up this year, the Infosys stock is down.