Infosys buyback in offing? Vishal Sikka led IT major hints at $2-2.5 bn offer

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Infosys has received demands from a few prominent shareholders for the “right capital allocation strategy”. It has already begun holding talks with a few investment bankers for the proposed issue. (Reuters)

After Tata Consultancy Services (TCS) said it would buy back shares for Rs 16,000 crore, Infosys on Thursday dropped big hints that it would return cash to shareholders as early as April. The buyback offer, the first in Infosys’ history, is expected to be for an amount of around $2-2.5 billion (approximately Rs 13,364-16,705 crore). The IT major had cash reserves of Rs 35,697 crore at the end of December 2016. The Infyosys scrip closed the Thursday’s session at Rs 1,009.05 apiece, up 1.73%. In a communication to the exchanges, Infosys said, “Recommended the adoption of new Articles of Association of the company in conformity with the Companies Act, 2013, to the shareholders for approval.” This adoption is necessary under the new Companies Act for any firm to go for a buyback. These resolutions will be placed before a postal ballot for the approval of shareholders and the results are expected on April 5.

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Infosys has received demands from a few prominent shareholders for the “right capital allocation strategy”. It has already begun holding talks with a few investment bankers for the proposed issue.

In a recent investor call, Infosys CEO Vishal Sikka had said, “None of these options is off the table. The key is to ensure that we are looking at exercising the cash in a way that provides the most advantage to the shareholders.”

TCS announced its buyback earlier this week at a price of R2,850 per share. Other major IT player Wipro has already done a share buyback in May 2016 with an issue size of R2500 crore at a price of R625 per share.

The issue of buyback has been hovering over Infosys for quite sometime now. In 2014, two former board members of Infosys — TV Mohandas Pai and V Balakrishnan — had sought a buyback of R11,000 crore to enhance the shareholder value.

Cognizant recently announced that it has approved a plan to return $3.4 billion to shareholders over the next two years through share buybacks and dividend payout. This came out following a letter from one of its investors, Elliott Management, which had articulated that Cognizant’s shares were undervalued.

The Infosys Board also approved the recommendation of the Nomination and Remuneration committee’s revising the remuneration of COO UB Pravin Rao.

Cognizant recently announced that it has approved a plan to return $3.4 billion to shareholders over the next two years through share buybacks and dividend payout. This came out following a letter from one of its investors, Elliott Management, which had articulated that Cognizant’s shares were undervalued.

The Infosys Board also approved the recommendation of the Nomination and Remuneration committee’s revising the remuneration of COO UB Pravin Rao.

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