Under a buyback through the tender offer, a company usually offers to repurchase a specific number of shares at a fixed price that is higher than the current market price. This offer is open for a limited period, and shareholders can offer their shares to the company.
The pre-set buyback provides certainty to investors about the value they will receive for their shares. If the number of shares tendered exceeds the number the company wants to buy back, the shares are accepted on a proportional basis.
This is fifth such buyback for the Bengaluru-based IT major, which is battling reduced spending from clients and AI-led disruption in its business. Previously, the company had announced buybacks worth Rs 13000 crore in 2017, Rs 8,260 crore in 2019, Rs 9,200 crore in 2021 and about Rs 9,300 crore in 2023.
This current buyback signals management’s confidence in the company’s long-term cash flows and growth prospects despite a cautious revenue outlook for the current fiscal.
Analysts say the buyback will not only improve key financial metrics like EPS and ROE, it also it also offers tax-efficient returns to shareholders compared to dividends, while optimising capital structure amid excess cash reserves.Historically, Infosys buybacks have supported the share price with post-announcement gains seen over 3-6 month periods, though analysts say short-term volatility remains possible.Shares of Infosys saw some profit booking today ahead of the board meeting and closed about 1.3% lower at Rs 1512 apiece. The stock has been under pressure this year, down about 20% so far as investors remained cautious on the growth outlook.
Brokerages have noted that the business environment remains uncertain due to unresolved tariffs and geopolitical situations, leading clients to be cautious with discretionary spending and delaying decision-making. The company has guided for 1-3% growth in constant currency for the current fiscal.
In the recent quarter, Infosys secured deals around $3.8 billion in large deals in the first quarter, with 55% being net new. Additionally, the company does not foresee any significant change in the second quarter and expects performance to remain at similar level.
As of June end, the company held robust flows of about Rs 40,000 crore in cash and liquid investments, which is a source of strength in uncertain environment.
Technically, analysts say the stock looks positive in the short term as the counter has important support at Rs 1485, which should act as a safety level for buyers.
“As long as it stays above this support, the trend is likely to remain upward. If the price holds above Rs 1500, it can move towards Rs 1540 first and then Rs 1560. Buying on small dips is a good strategy with a stop-loss at Rs 1485. Overall, the stock is showing strength, and traders can stay positive while being cautious near support levels,” said Riyank Arora, Technical Analyst, at Mehta Equities.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
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