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IT company Infosys is going to do its biggest share buyback till date. In this, the company will buy 10 crore shares from its investors at the rate of ₹ 1,800 per share. With this he will get back his 2.41% stake.
This Rs 18,000 crore program will open for subscription from November 20 (Thursday) and will close on November 26. The record date has been fixed on November 14, that is, those who have purchased shares before this date can participate in it.
What is share buyback?
Understand in simple language what the company said in the regulatory filing… ‘The company currently has much more cash than required. Even after taking into account the amount of cash that will be required in the future, there is still a lot of surplus cash left. Therefore, instead of keeping this extra money in the bank, the company is returning it to the shareholders – that too by purchasing its own shares from the market.
Why is share buyback done?
In simple language, share buyback is when a company buys back its own shares from investors. There are several benefits of doing this:
- Less shares, more value: Reducing the number of shares increases the earnings per share (EPS), which can cause the share price to go up.
- Cash usage: If the company has more cash than required, then it gives benefit to the investors by investing it in buyback.
- Message of confidence: By buyback the company shows that it has confidence in its future and feels that its shares are undervalued.
Program divided into two categories, priority given to small investors
Reserved category- Small investors i.e. those who have shares of the company up to ₹ 2 lakh. They will get reservation of 15% shares, which will be more than their entitlement. The buyback ratio in the reserved category is 2:11, that is, 2 shares can be tendered for every 11 shares.
General Category- Those holding shares worth more than Rs 2 lakh come in this category. The buyback ratio in this category will be 17:706.
Entitlement means the right to tender (offer for sale) according to the number of shares held on the record date.
Dividend will increase, shareholders value will increase
Infosys believes that this buyback will prove beneficial for the shareholders. Due to reduction in equity base, return per share i.e. earnings will increase. The company will continue its half yearly dividend and will also consider giving a special dividend. The target is to achieve 85% free cash flow return in the next 5 years starting from financial year 2025.
Infosys shares fell 15% in one year
Today i.e. on November 19, Infosys shares are trading at Rs 1,541, up 3.67%. The company’s shares have risen 5.48% in the last one month. However, it has fallen by 1.21% in the last 6 months, by 15.55% in one year and by 18.14% this year i.e. from January 1 till now. The market value of the company is Rs 6.4 lakh crore.
Narayan Murthy started the company in 1981
Founded in 1981, Infosys is a NYSE listed global consulting and IT services company. The company was started with a capital of 250 dollars (approximately Rs 22,000 as of today).
The 40 year old company has around 1900 customers in more than 56 countries. It has 13 subsidiary companies across the world. Narayana Murthy of the company. The CEO and managing director is Salil Parekh. D Sundaram is the Lead Independent Director.
Infosys’ profit increased by 13.2% in the second quarter
Infosys’ consolidated net profit in the July-September quarter increased by 13.2% to Rs 7,364 crore compared to the same quarter last year. It was Rs 6,506 crore in the same quarter last year. At the same time, revenue increased by 8.6% to Rs 44,490 crore, which was earlier Rs 40,986 crore.
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