Is Infosys mulling a buyback offer to instill confidence in the investors?

Thomas George

Infosys scrips ended above 1000 rupee mark per share on the news of their consideration of buyback offer today. In a filing to the stock exchanges, the IT bellwether said in that the board will consider a proposal for buyback of shares of the company at its meeting on August 19.

After a series of buyback offers by top Indian IT Service companies in the last few months, most of the investors are eagerly waiting for an announcement likely from Infosys too.

As per the government regulations a company can buy back a maximum of 25% of its net worth with its shareholders' approval. In the case of Infosys, its net worth is close to Rs 685 billion and the maximum amount of buyback it can offer is up to Rs 170 billion.

The board members has also taken a cautious and whetted move by first indicating that they would like to bring the co-founder N.R. Narayana Murthy back on the board to garner more faith among the Infy well-wishers. After a series of new senior executive departures making news in media, the company is looking at falling back on its old faces to renew the old Infosys order with their trusted patriarch as its guide- whose direction may help the an enterprising CTO turned CEO of Infosys, Vishaal Sikka to merge the current new and old forces at Infosys in this transition.

The growth indicator in financials also state that the company is going through a transition and it may not be the same growth trajectory in future. It might be even lower growth percentages for the next financial year.

In such situation coupled with unfavorable market conditions and multiple headwinds, it seems to be the only resort to make a buyback offer and returning cash to its shareholders in more tax-efficient manner.