Infosys hits 3-year low as buyback fails to cheer Street

The stock hit three-year low of Rs 881, down 4.5%, extending its Friday's nearly 10% fall on NSE.

Infosys dipped  to its three-year low of Rs 881, down 4.5% in intra-day trade, extending its previous day’s fall of nearly 10% on National Stock Exchange (NSE) after the IT major's buyback plan failed to cheer the markets. The company on Saturday announced that it would buy back shares worth up to Rs 13,000 crore, or 4.92%, from investors at Rs 1,150 per share.

The share buyback price is at a whopping 24.6% premium to its Friday’s closing price of Rs 923. But this is post 10% correction the stock underwent on Friday, after the resignation of Managing Director and Chief Executive Officer (CEO) Vishal Sikka.

“Vishal Sikka's exit was the biggest risk and with this becoming an eventuality, the company faces a big challenge of filling the leadership vaccum. Sikka had guided the company well at a time when the industry is undergoing a metamorphosis towards newer technologies,” according to analysts at Antique Stock Broking.

We believe that leadership churn and the resultant growth slowdown will result in stock trading at the lower end of its historical range, said the brokerage firm in company update.

With the board of directors accepting Vishal Sikka’s resignation, analyst at Elara Capital expect Infosys to lose investor as well as client confidence.

“We believe FY18 guidance is now at risk, given likely client backlash. We cut our revenue estimates by 0.5% for FY18, 2.9% for FY19 and 6.1% for FY20. We also lower our PAT estimates by 1.3% for FY18, 8.0% for FY19 and 16.6% for FY20, expecting a dip in realization,” the brokerage firm said in a report.

At 9:28 am; the stock was down 2.3% at Rs 902 on NSE, as compared to 0.44% rise in the Nifty 50 index. A combined 9.91 million shares changed hands on the counter on NSE and BSE so far. The stock is trading at its lowest level since August 2014.