Infosys gains 3%, hits new high as board to consider buyback of shares

The buyback could be worth Rs 10,000 - 12000 crore (around 2 per cent of market cap) at a price of Rs 1650- 1670 per share, a media report said

Shares of Infosys hit a new high of Rs 1,480, up 2.7 per cent, on the BSE in intra-day trade on Monday after the information technology (IT) major said it will consider a proposal for buyback of fully paid-up equity shares of the company at its meeting to be held on Wednesday, April 14, 2021. This will be the third buyback of shares by the company.

“The board of the company will consider a proposal for buyback of fully paid-up equity shares of the company at its meeting to be held on April 14, in accordance with the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018,” the statement said.

The IT services giant is also slated to hold a board meeting on April 13 and 14, to approve and take on record the consolidated financial results of the company for the quarter and year ended March 31, 2021.

At the end of the December quarter (Q3FY21), Infosys had cash and investment of $4.5 billion. The cash and investments continued to be strong despite paying $687 million as half-yearly dividend during this period, the company said in its quarterly report.

Infosys has announced buybacks twice in the past. In 2017, the company's first buyback had returned shareholders Rs 13,000 crore at Rs 1,150 per share. And in 2019, the company had announced buyback of shares, costing the company Rs 8,260 crore at price not exceeding Rs 800 per share.

According to The Times of India, the buyback could be at Rs 10,000 - 12000 crore (around 2 per cent of market cap) at a price of Rs 1,650- 1,670 per share. This, coupled with healthy financial performance, prompts us to remain positive on the stock, ICICI Securities said in a note.

The brokerage firm expects Infosys to report a 4.5 per cent quarter on quarter (QoQ) increase in revenues in constant currency (CC) terms mainly led by traction in cloud migration, the ramp-up of deal wins and Vanguard deal. The company is also witnessing a healthy deal pipeline led by lift & shift deals, acceleration in digital technologies and cost take out deals.

With a cross-currency tailwind, we expect dollar revenues to increase 5.3 per cent QoQ. However, we expect margins to decline 132 basis points (bps) QoQ due to wage hikes, higher travel & facility cost partially offset by automation and offshoring. The profit after tax is expected to increase 22 per cent year on year due to low base and savings in travel & facility cost, it said in the results preview.

At 09:25 am, Infosys was trading 2 per cent higher at Rs 1,465 as compared to a 2.2 per cent decline in the S&P BSE Sensex. A combined around 3.3 million equity shares changed hands on the counter on the NSE and BSE so far.