Infosys Buyback: How 26 Lakh Shareholders Can Benefit From Record Rs 18,000 Crore Share Repurchase

Infosys Ltd. will initiate its first buyback in three years, which is almost double the size of the earlier two buybacks and higher than market estimates.

While the buyback is valued at Rs 18,000 crore, representing 10 crore shares or 2.4% of equity, it is not the highest in terms of equity percentage. In 2017, the Bengaluru-headquartered company repurchased 4.9% equity.

The buyback price of Rs 1,800 is a 19% premium to the current market price. The record date, which will determine eligible shareholders for the Infosys buyback, is yet to be announced.

The share repurchase process may take three to four months to complete, based on historical data. The stock has over 25.79 lakh owners.

According to NDTV Profit calculations, Infosys spends an average of 30% cash on buybacks. It buys back 14-15% of net worth. First-quarter cash and cash equivalents are at Rs 45,200 crore, while its net worth is at Rs 95,350 crore. The tech giant did its last buyback in October 2022.

The current buyback is a part of the capital return policy Infosys announced in 2024 of returning 85% of free cash flow over five years through dividends and repurchases.

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For every 100 shares of Infosys, a minimum of five shares will likely be repurchased. The acceptance ratio is how many shares are bought back when applied for the scheme.

The portion to be reserved for retail shareholders to offer their shares for the Infosys buyback is 15% or Rs 2,700 crore.

Retail shareholders are those who own shares worth less than Rs 2 lakh. At the current market price of Rs 1,510, it means having 132 shares.

If retail participation remains high, similar to previous buybacks, then the acceptance ratio could be lower at 5%.

At the buying price of Rs 1,800, gains would be limited for retail shareholders.

The buyback comes at a time of heightened pressure on IT stocks due to the worsening global macroeconomic situation led by tariff tensions between the US and India. Based on analyst views and valuations, the stock has a consensus target price of Rs 1,743, which suggests a potential 13.7% upside.

However, the range of analyst price targets is quite wide, with the highest forecast at Rs 2,085 seeing a 36% upside and the lowest at Rs 1,440, with a 6% downside. The stock's current valuation, with a 12-month forward price-to-earnings ratio of 21.5 times, is trading at a discount compared to its 5-year average price-to-earnings ratio of 25 times, suggesting it may be undervalued relative to its historical performance.

Infosys shares settled 1.17% lower at Rs 1,509.70 apiece on the NSE, compared to a 0.13% advance in the benchmark Nifty 50. The stock has fallen 21% in the last 12 months and 20% year-to-date.

Out of 50 analysts tracking the company, 35 maintain a 'buy' rating, 13 recommend a 'hold,' and two suggest 'sell,' according to Bloomberg data. The average 12-month consensus price target implies an upside of 15.1%.