Infosys trades flat ahead of Q3 results; board may announce share buyback

Since October 16, 2018, post-September quarter results, Infosys underperformed the market by falling 2 per cent against 3 per cent rise in S&P BSE Sensex.

Shares of Infosys were trading flat at Rs 677 apiece on BSE on Friday ahead of the board meeting today to consider the financial results for the third quarter of the financial year 2018-19 (FY19).

The stock hit an intra-day high of Rs 685, after opening at Rs 684. It touched a low of Rs 676 so far. At 11:30 am, the S&P BSE Sensex was trading 54 points or 0.15 per cent lower at 36,052 levels.

Infosys, the country's second largest IT services company, will also consider share buyback and a special dividend for shareholders as part of its capital allocation policy in the board meeting.

“The board of the company will consider proposal(s), including but not to limited to, buyback of fully paid-up equity shares of the company, payment of special dividend, for implementation of the capital allocation policy at its meeting to be held on January 11, 2019,” Infosys said in a regulatory filing on January 8, 2019 after market hours.

Post announcements, Infosys had gained 1.5 per cent in past two trading days, as compared to a marginal 0.35 per cent rise in the S&P BSE Sensex till Thursday.

Since October 16, 2018, post-September quarter results, the stock has underperformed the market by falling 2 per cent against 3 per cent rise in the benchmark index. Infosys had paid an interim dividend of Rs 7 per equity share.

Most brokerages expect the company's revenue in constant currency (CC) terms to come in between 1.3-2.2 per cent for October-December quarter (Q3FY19).

“Confidence in revenue momentum key for Infosys to rerates further. Infosys trades at 20 per cent discount to Tata Consultancy Services (TCS).  Infosys is likely to announce buyback in this quarter as cited in its capital allocation strategy. Net cash on balance sheet stands at Rs 30,400 crore as on Q2FY19. As per the company’s capital allocation policy, we expect the company to spend around USD 1.6 billion on the buyback. However, at the current price, Infosys would be able to buyback only around 3 per cent of equity,” Rajat Gandhi, analyst at Prabhudas Lilladher said in the quarterly preview.

“We expect Infosys to report 2 per cent quarter-on-quarter (QoQ) in constant currency (cc) revenue growth for Q3FY19. Cross currency headwind would be around 50bps for the quarter. Hence, reported USD revenues would grow by 1.5 per cent QoQ. We expect Infosys to maintain its guidance for 6-8 per cent cc revenue growth for FY19E and EBIT margin guidance of 22-24 per cent for FY19E,” the brokerage firm said.

Edelweiss Securities expects Infosys’ revenues to grow 2 per cent QoQ in cc terms, impacted 50 basis points (bps) due to cross currency headwinds (US dollar growth 1.5 per cent QoQ). CLICK HERE FOR WHAT ANALYSTS EXPECT.