Ongoing buybacks may boost Infosys shares after April 12 results

Infosys’ shares are likely to get support from the ongoing buyback process after the announcement of its fourth quarter results on April 12 as the company has bought back only around one tenth of the shares out of its planned repurchase programme till March 31.

According to regulatory filings given on the US Securities and Exchange Commission (SEC) and Indian exchanges, the Bengaluru-headquartered firm has bought back (that includes shares that are in the process of being bought back) 12.65 million shares till March 31 against its plan of buying 103.2 million shares from shareholders.

“Infosys is in the midst of executing one of its largest stock buyback plans. This ongoing buyback programme will provide stability to the stock price even if the results are not as per expectations,” said V Balakrishnan, chairman of Exfinity Venture Partners, who is also a former CFO and board member of Infosys. Infosys declined to comment on the issue. 

On January 11, Infosys had announced to buy back shares worth up to Rs 8,260 crore at Rs 800 apiece. The buyback opened on March 19 after receiving shareholders’ approval. This is the second consecutive year of share repurchase as the IT firm had conducted such programme worth Rs 13,000 crore in 2018. 

According to market experts, usually the timing of the repurchase is decided by the investment bankers, who are executing the plan. In this case, since only one tenth of the shares had been bought back so far, rest of the repurchase is likely to provide support to Infosys shares in coming time.  

“Infosys stock will get the support (from buyback) irrespective of how the (Q4) numbers are. Even if the numbers are bad, the company can buy back the rest 90 million shares from the market and stabilise the price,” said a Mumbai-based analyst. “Usually, it is left to the bankers to decide on the timing of the purchase. I think, timing-wise, it is perfect.”

While buyback cushion can be used to ward off fluctuation in share prices, it is more of a call from the bankers managing the issue than management, another industry expert said.  “Of course, the buyback cushion is there to overcome any uncertainties in the market. But, I don't think Infosys management has anything to do with it,” said Pareekh Jain of Pareekh Consulting. “The current management has put so much of effort to stabilise company's operations in the pas one year and showed some good results. So, they will not like to get any undue attention for any such matter.”

According to brokerage firms, Infosys is likely to report strong revenue growth in the fourth quarter of FY19 on the back of momentum in the big deal space. Edelweiss Research has also said that accelerating digital growth, improving deal pipeline and revival in the BFSI (banking, financial services and insurance) and retail verticals would accelerate Infosys’ revenue growth in the next financial year.