Infosys Makes History with Massive Share Buyback Programme
Indian IT giant Infosys has launched its largest-ever share buyback programme worth a staggering ₹18,000 crore, marking a significant moment in the company's corporate history. The buyback window officially opened for subscription on November 20 and will remain accessible to eligible investors for five trading days until November 26.
The record date for determining shareholder eligibility was set as November 14, meaning only investors who held Infosys shares in their demat accounts on this specific date can participate in this corporate action. This strategic move represents one of the most substantial capital return initiatives in India's IT sector.
Detailed Buyback Structure and Terms
Infosys plans to repurchase 10 crore fully paid-up equity shares with a face value of ₹5 each, accounting for approximately 2.41% of the company's total paid-up equity share capital. The buyback price has been fixed at ₹1,800 per share, presenting a significant premium over current market prices.
In a positive development for small investors, the company has reserved 15% of the total buyback shares exclusively for small shareholders. This reservation applies to the 25,85,684 small shareholders who held shares worth not more than ₹2 lakh. The acceptance ratio for this reserved category stands at 2:11, meaning investors will see 2 shares accepted for every 11 shares they tender.
For general category investors, the acceptance ratio is 17:706. Notably, company promoters including Nandan M Nilekani and Sudha Murty have decided not to participate in the buyback programme. The promoter group collectively held 13.05% stake in Infosys at the time of the buyback announcement.
Expert Analysis: Should You Tender Your Shares?
Market experts have mixed views on participation strategies. Prashanth Tapse, Senior VP of Research at Mehta Equities Ltd, believes the buyback presents an attractive opportunity for retail investors given the decent premium offered. However, he cautions that taxation considerations play a crucial role in the final decision.
"Infosys buyback would be only attractive if investors fall in a lower income slab. Long term conservative investors need not worry to hold. While short term investors can calculate the tax and participate in the tender," Tapse advised.
Abhinav Tiwari, Research Analyst at Bonanza, highlights that since Infosys promoters are not participating, the acceptance ratio for public shareholders, particularly retail investors, should be relatively high. This could improve the effective realized upside for participating investors.
Critical Tax Considerations for Investors
The taxation aspect emerges as a crucial factor in the buyback decision-making process. Under current regulations, share buybacks are taxed as "deemed dividend", making the entire payout fully taxable at the shareholder's applicable income tax 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. For lower tax bracket investors, the tender route still delivers clear incremental value," explained Tiwari.
Infosys will deduct tax at source when distributing the buyback consideration, meaning net proceeds will be lower than the advertised ₹1,800 per accepted share. This tax deduction could substantially reduce net gains, especially for investors in higher tax brackets.
The company's strong financial position underscores this buyback initiative, with Infosys funding the entire ₹18,000 crore programme through internal cash and reserves. This demonstrates the company's robust free cash flow generation capacity and financial stability.
"Infosys buyback partially offsets slower EPS growth by reducing share count and improving ROE which is supportive for long term holders who do not tender," Tiwari added, highlighting the broader strategic benefits of the buyback programme.
Investors must weigh these factors carefully, considering their individual tax situations and investment horizons before deciding whether to participate in this historic buyback offer.
