Infosys Buyback Concludes with Stellar 8.26 Times Oversubscription
Shares of the IT behemoth Infosys traded higher on Thursday, propelled by the successful and overwhelming conclusion of its massive ₹18,000 crore share buyback programme. The buyback window, which was open from November 20 to November 26, witnessed an exceptionally strong response from investors.
Record Demand and Share Price Reaction
According to data from the Bombay Stock Exchange (BSE), shareholders placed bids for a staggering approximately 82.61 crore shares. This figure dramatically overshadows the company's buyback size of just 10 crore equity shares, resulting in the offer being oversubscribed by about 8.26 times. Following this robust demand, Infosys shares climbed as much as 1.06% to ₹1,574.40 apiece on the BSE during the trading session.
The company has successfully repurchased the planned 10 crore equity shares at a price of ₹1,800 per share. This buyback price represented a significant premium, being 15.5% higher than the stock's closing price on Wednesday, November 26, which was the final day of the buyback offer.
Analysts' Bullish Stance and the AI Outlook
Market analysts continue to hold a positive view on Infosys, driven by its improving fundamental business performance and a confident management outlook. A key takeaway from recent investor meetings, as highlighted by brokerage firm Jefferies, is the company's perspective on Artificial Intelligence (AI).
Infosys believes that the current wave of AI adoption will ultimately be a net positive for the company over the long term, even though it may suppress growth and pricing in the immediate future. The company has reiterated its strong positioning in the AI space, pointing to its leadership in industry rankings and a solid client base, particularly in the banking sector.
Gradual AI Adoption and a Steady Demand Environment
However, Infosys tempered expectations by noting that the rollout of AI by enterprises is progressing at a slower-than-anticipated pace. The company explained that this gradual adoption is partly due to challenges in integrating individual AI solutions and the need for clients to modernize their underlying technology stacks to fully capitalize on AI's benefits.
Furthermore, a weak macroeconomic environment and an unclear path to Return on Investment (ROI) are causing many clients to defer such significant investments. On the broader demand front, Infosys indicated that the environment has remained stable without worsening. The focus, however, continues to be on cost-reduction deals rather than discretionary technology spending.
Deal wins remain on a strong trajectory, with the Banking, Financial Services, and Insurance (BFSI) vertical acting as the primary growth driver. The manufacturing vertical has also performed better than the management's initial expectations.
Financial Strength and Share Price Target
Demonstrating robust financial health, Infosys delivered its highest-ever Free Cash Flow (FCF) of $3.8 billion in FY25. This was achieved through improving margins, better collection processes, and optimized costs. The management expects this strong cash generation trend to continue, with FCF projected to remain above 100% of net profit in FY26.
Reflecting the positive sentiment, Jefferies has maintained a 'Buy' rating on Infosys with a share price target of ₹1,700. This implies a potential upside of over 9% from its previous closing price. While the stock is down 17% on a year-to-date basis, it has delivered a gain of over 42% in the past five years, underscoring its long-term value.
