Infosys amends Articles of Association to go for share buyback

Shareholder approval pending; IT firm has a cash pile of Rs 35,697 cr

Infosys, the second-largest information technology (IT) firm in the country, has amended its articles of association (AoA) so that it might to go for a share buyback. On Thursday, the Bengaluru-based firm said it had sought shareholders’ approval, to conform to the Companies Act 2013.

Shareholders and founders of the company have sought better capital allocation. 

As on December 31, 2016, Infosys had Rs 35,697 crore in its kitty; sources said the company could return half of it to shareholders through buybacks or dividend.

Asked if the company was planning to pay out the excess cash on its books to shareholders through a buyback, Chief Executive Officer Vishal Sikka said, “All the options are on the table and we are not opposed to any of them.”

In the second quarter of the current financial year, the company added a little more than Rs 2,400 crore to its cash reserves, with a 7 per cent sequential growth.

The biggest IT services firm in the country, Tata Consultancy Services, announced it would buy back 56.1 million shares (2.85 per cent of its equity) worth Rs 16,000 crore at Rs 2,850 per share.

This is the first buyback since the company listed and the biggest in the domestic capital market. Wipro had announced a buyback of Rs 2,500 crore last year. Its Chief Strategy Officer Rishad Premji said the company may evaluate options of buyback and special dividends. 

The demand for a share buyback using the cash pile IT firms are sitting on gathered pace when Cognizant recently approved Elliott Management’s proposal for one. The company announced it would return $3.4 billion over two years through buyback and dividend. 

Malcolm Frank, executive vice-president, strategy and marketing, Cognizant, recently told Business Standard shareholder activism in the sector in recent times was a result of drastic changes in the sector and its impact on businesses.