Infosys' Rs 9,200 crore share buyback program is set to begin on June 25, with the IT giant proposing to buy back shares at a maximum price of Rs 1,750 per share. According to a regulatory filing on Wednesday, Infosys published a public statement in several newspapers on June 23 for the buyback of its equity shares from the open market via the stock exchange route.
According to the planned timeframe, the buyback will begin on June 25, 2021, and end on December 24, 2021, or when the corporation completes the buyback by deploying the amount equivalent to the maximum buyback size, whichever comes first.
Why Has Infosys Come Out With A Share Buyback Plan?
Companies purchase back shares in the market at a greater price than the market price, usually to show confidence in the company's future prospects or to claim that the shares are undervalued.
Companies with a huge cash pile and few investment alternatives are increasingly considering repurchase offers. Infosys has a lot of cash on hand, so it was an obvious choice for a buyback. In addition, a buyback made more sense from a tax standpoint than a special dividend.
The government levied an additional 10% tax on dividends in the hands of shareholders in the 2016 Union Budget. A buyback has no such tax implications, making it more tax efficient than a special dividend. Above all, a repurchase reduces the number of outstanding shares, which enhances the company's EPS. At the very least, it has the potential to increase the company's value!
How to Participate in Infosys Share Buyback?
You must have Infosys shares in your demat account as of the Infosys record date (2021). After you have the shares in your account, you can participate in the buyback.
To participate in the Infosys buyback, follow these steps: You must have an Infosys share in your demat account on the Record Date (2021). Because it takes T+2 days for shares to be deposited in your DP account, you should plan your purchases properly. Following that, the firm will announce when the repurchase window will open and shut, and you will be required to tender your shares in the buyback process. Your shares will be sold in the repurchase process, and the funds will be directly deducted from your bank account, depending on the buyback acceptance ratio. Any shares that are rejected will be returned to your demat account, where you can sell them on the open market or keep them for long-term benefit.
Infosys Buyback details
The indicative maximum number of equity shares bought back, assuming the market price of the equity shares is equal to the maximum buyback price, would be 5,25,71,428 equity shares, or approximately 1.23 percent of the company's paid-up equity share capital as of March 31, 2021," according to the advertisement.
Infosys will use at least half of the cash set aside as the maximum repurchase size, i.e. Rs 4,600 crore, for the buyback. The corporation will buy an estimated minimum of 2,62,85,714 equity shares based on the minimum buyback size and maximum buyback price.
Infosys Share Buyback History
This will be the third Infosys share repurchase if it goes through.
In 2017, Infosys conducted its first share repurchase, purchasing a total of Rs 13,000 crore in shares at a price of Rs 1,150 per share.
In 2019, Infosys bought back Rs. 8,260 crore in shares at a price of Rs 747 per share in its second buyback.
- Infosys Price: Rs1,503
- Market Cap: 6.38LCr
- P/E ratio: 33.02
- Div yield: 1.80%
The stock returned 142.31 percent over a three-year period, compared to 43.81 percent for the Nifty 100 index. Over a three-year period, the stock returned 142.31 percent, while the Nifty IT provided investors a 105.9% gain.
Share Buy Back Benefits to Companies?
When a business buys its outstanding shares, commonly known as a share buyback, it reduces the number of shares accessible on the open market. Companies buy shares for a variety of purposes, including boosting the value of remaining available shares, lowering the offering, and blocking other shareholders from engaging in the control.
As a result, the earnings per share (EPS) of the shares rise, while the price/earnings (P/E) ratio falls or the share price rises. Investors can see that the company has enough cash to deal with emergencies and that there is a low chance of economic troubles if shares are repurchased.