Infosys buyback: Promoters’ voting strength may rise by 0.32%, despite non-participation  

Given the decision of Infosys promoters and the promoter group not to participate in the ₹18,000-crore share buyback scheme of the company, a 100% successful buyback may now increase their voting strength by around 0.32%—from the current 13.05% to 13.37%, according to the IT major’s draft offer filing to the stock exchanges.

“Assuming participation in the buyback is to the extent of 100% (full acceptance) from all the other eligible shareholders up to their buyback entitlement, the aggregate shareholding of the promoters and members of the promoter group after the completion of the buyback shall increase to 13.37%...from 13.05% of the pre-buyback total paid-up equity share capital, and the aggregate shareholding of the public shall change to 86.63% from 86.95% of the pre-buyback total paid-up equity share capital,” read the draft offer letter, which also mentioned that the promoter and promoter group, in various communications dated September 14, September 16, September 17, September 18, and September 19, conveyed their intentions to stay away from the buyback. 

Currently, the promoter and promoter group class of shareholders include the founders—Narayana Murthy, Nandan Nilekani, S.D. Shibulal, K. Dinesh Krishnaswamy, S. Gopalakrishnan, and their immediate family members, including children and grandchildren, who hold a 14.3% stake with a 13.05% voting share in the company.

India’s second-largest IT services and consulting company announced the share buyback scheme of ₹18,000 crore on September 11. The company is offering its shareholders ₹1,800 per share and is looking to mop up to 10 crore shares. The buyback will happen through a tender process representing 21.68% free reserves of the company as of June 30. More recently, in its draft offer filing to the stock exchanges, the company said that it expects the record date for the buyback to be on or around November 14. 

At the company’s recent analyst call, CFO Jayesh Sanghrajka said that in FY25, the company saw a strong cash flow on the back of tax refunds, giving enough headroom for returning additional capital to the shareholders. “And as part of that, we looked at various options, and one of those was buyback, which is what we are executing. The amount is ₹18,000 crore at ₹1,800 [apiece], which we will be executing. At this point, we are awaiting shareholder approval,” he had said.  

While the extent of the buyback’s success remains to be seen, the recent amendments to the Income Tax Act have made the buyback option somewhat unattractive for shareholders. Earlier, companies executing a buyback were taxed at an effective rate of about 23% on the distributed income, while the shareholders received it tax-free.  

After the Budget 2024 amendments to the Income-Tax Act, the entire consideration paid by a company to resident shareholders on share buyback is now considered as dividends (with effect from October 1, 2024). Hence, for shareholders, any amount paid by the company on account of a buyback of shares is now taxed as dividend income on which personal income tax slabs apply.

While the amendment provides for offsetting capital loss against the cost of acquisition of shares, experts say this could likely only benefit small shareholders. However, for non-resident shareholders, who could avail the provisions of the Double Tax Avoidance Agreement (DTAA) or other tax treaties, the buyback proposition could still be attractive given a lower tax outflow compared to resident Indian shareholders.