This will be the company’s third buyback, and in less than five years.

Infosys logo amid plants at its office
Atom IT Monday, April 12, 2021 - 13:04

Infosys announced on Sunday that it is planning to buy back more shares again with a proposal in this regard on the agenda at its board meeting on April 14. This will be the company’s third buyback, and in less than five years.

"The board will consider a proposal for buyback of fully paid-up equity shares at its meeting on April 14, 2021, in accordance with the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018," said the city-based company in a regulatory filing on the BSE.

In a buyback, shares of a company that can be publicly traded are bought back by the promoters, where the company offers a fixed amount per share to buy the shares back. This amount is usually above the prevailing market price. According to the Times of India, this time the size of the buyback could be between Rs 10,000-12,000 crore, and could be between Rs 1,650-1,670 apiece. 

Buybacks are done for a variety of reasons, such as to reward shareholders of if there is cash in the back but not projects to invest in. Other reasons include ownership consolidation, to make financial ratios look healthier, the stock is undervalued etc.

"Typically, Indian IT companies like Infosys, TCS, Wipro and HCL Tech were sitting on billions of dollars in cash. Now, cash in the bank has a cost and it is better returned to shareholders...Most of the IT companies are operating on matured business models and there is not much to invest in terms of new projects. Too much cash in the books and too few investment opportunities is a key reason for buyback of shares," a blog by Motilal Oswal says. 

The Board of Infosys will meet on April 13-14 to approve its financial results for the fourth quarter and fiscal year 2020-21. At the same time, the board will also recommend a final dividend for the financial year ending March 31, 2021.

Infosys made a maiden buyback of 11.3 crore equity shares in December 2017 for Rs 13,000 crore at Rs 1,150 per share. The second time when the IT major bought back shares was in March 2019, buying 2.36% of the paid-up capital (103.25 million shares) worth Rs 8,260 crore at Rs 800 per share through the open market route. The company's blue-chip scrip of Rs 5 face value touched an all-time high of Rs 1,480 on April 12 before falling during the day amid the bloodbath in the markets.

The financial results season for Indian IT companies for Q4 of FY21 and for the financial year kicks off from Monday, with Tata Consultancy Services slated to report its results on Monday. The sector’s results for the quarter are expected to be robust. 

In Q3, Infosys posted its best sequential growth in nine years in the third quarter, when it grew by 5.3%.

With IANS inputs

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