Infosys, the country’s second largest software exporter, has announced buyback of 5.02 crore equity share of the face value of ₹5 each, aggregating to ₹9,300 crore. The proposal was approved by the board of directors at a meeting on Thursday alongside the company's second quarter earnings. Infosys will carry out the share buyback at ₹1,850 per equity share, a strong premium of 30% against today's opening price of ₹1,419.75 on the Bombay Stock Exchange (BSE). Previously, Infosys announced buybacks of ₹13,000 crore, ₹8,260 crore, ₹9,200 crore in 2017, 2019, 2021, respectively, at 20-25% premium to then prevailing market price.

“The board approved a proposal for the company to buyback its own fully paid-up equity shares of face value of ₹5 each from the equity shareholders of the company (other than the promoters, the promoters group and persons in control of the company), being 14.84% and 13.31% of its total paid-up capital and free reserves as on September 30, 2022 (on a standalone and consolidated basis, respectively) for an amount, payable in cash, aggregating up to ₹9,300 crore (“Maximum Buyback Size”) which is less than 15% of the aggregate of the total paid-up share capital and free reserves of the Company, based on the latest audited financial statements of the Company as at September 30, 2022,” Infosys says in an exchange filing.

As per the filing, the company will buyback shares at a price not exceed ₹1,850 per equity share through the open market route on the Indian stock exchanges.

“American Depositary Shares (“ADS”) holders are permitted to convert their ADS into Equity Shares, and, subsequently, opt to sell such Equity Shares on the Indian stock exchanges during the Buyback period,” the release says.

The IT major says the maximum number of equity shares bought back would be 50,270,270 equity shares, comprising around 1.19% of the paid-up capital of the company as of September 30, 2022.

As per the company, the board has constituted a buyback, comprising the Chief Financial Officer, the Deputy Chief Financial Officer, the General Counsel and the Company Secretary of the company. The scheme is subject to the approval of the members of the company by way of a special resolution and all other requisite regulatory approvals.

Last year, Infosys had launched a share buyback of ₹9,200 crore, which opened between June 25 and September 14, 2021.

According to domestic brokerage ICICI Securities, Infosys has a payout policy to return 75% of its FCF (free cashflow) over 5 years (FY20-FY24E) to shareholders. Assuming 75% payout over the cumulative FCF of ₹50,600 crore over FY23E-FY24E, the dividend plus buyback amount is expected to be ₹19,000 crore per year, the brokerage said in its report.

As per the report, IT heavyweight TCS, Infosys, and Wipro have consistently announced buybacks with a gap of 1.2-2 years. Recently, Wipro launched share buyback in Oct’20 and the company is eligible to announce one in 2022. TCS announced its last buyback in Jan’22 and won’t be eligible for another until Jan’23 (based on the criterion of a minimum one-year gap between successive buybacks). HCL Technologies and Tech Mahindra have done buybacks less frequently and, going by past trend, are less likely to use this route for payout.

Ahead of the announcement, Infosys shares closed Thursday’s trade at ₹1,419.75, down 0.64% on the BSE.

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