Infosys slips 3% on closure of share buyback, recovery in rupee

In the calendar year 2019, Infosys has outperformed the market by surging 22 per cent as compared to a 4 per cent rise in the Sensex and 12 per cent gain in the S&P BSE Information Technology index.

Shares of Infosys slipped 3 per cent to Rs 781 in the intra-day trade on the BSE on Tuesday after the information technology (IT) firm closed the buyback offer as it utilised almost full size of the issue approved.

“The company has bought back 110 million equity shares at an average price of Rs 747.38 per share; and deployed an amount of Rs 8,260 crore, utilising 99.99 per cent of the maximum buyback size till August 26, 2019,” Infosys said in a regulatory filing on Monday after market hours.

Consequently, the buyback committee has approved the closure of the buyback with effect from August 26, 2019, prior to the expiry of six months from the commencement date, it added.

Infosys in January had announced that it would buy back shares of the company for an amount aggregating up to Rs 8,260 crore (maximum buyback size) at a price not exceeding Rs 800 per equity share.

Besides, sharp recovery in rupee also led to a slide in the stock. The rupee on Tuesday opened 32 paise higher at 71.70 against the US dollar. The domestic unit on Monday declined by 36 paise to close below the 72 level for the first time in nine months, hit by a 'flash crash' in global currencies due to uncertainty over the trade front. READ MORE

As a result, most IT stocks were trading in the negative territory. While Tata Consultancy Services (TCS) was down over 1 per cent lower at Rs 2,249 apiece, Tech Mahindra was quoting at Rs 687, down over half a per cent. On the other hand, HCL Tech and Wipro were trading flat with positive bias. 
 

In calendar year 2019, Infosys has outperformed the market by surging 22 per cent till Monday. In comparison, the benchmark S&P BSE Sensex has gained 4 per cent, while the IT sector index has risen 14 per cent during the same period.

Infosys board has revised its Capital Allocation Policy. Effective from the current financial year 2019-2020 (FY20), the company expects to return approximately 85 per cent of the free cash flow or FCF cumulatively over a 5-year period through a combination of dividends/share buyback, subject to applicable laws and requisite approvals.

However, analysts at Nirmal Bang believe capital return to shareholders is not as potent a stock driver for IT companies as it was earlier because the cash hoard is shrinking after two to three rounds of share buyback over the past three years.

At 11:40 am, Infosys was trading 2 per cent lower at Rs 784 apiece, against 0.35 per cent rise in the benchmark index. A combined 3.7 million equity shares changed hands on the counter on the NSE and BSE till the time of writing this report.