Infosys Ltd. has started buying back its shares as of Dec. 7, through an open market purchase. The repurchase programme helps investors gain a certain level of confidence and provides some sort of floor to the stock price.
For example, Infosys bought shares worth Rs 200 crore at an average price of Rs 1,615 per share. However, the maximum price for the buyback is Rs 1,850 per share.
The buyback will continue for a maximum period of six months. Infosys will buy back around 5 crore shares, comprising approximately 1.19% of the paid-up capital of the company as of Sept. 30 on a standalone basis at a maximum price of Rs 1,850 per share.
However, the number of equity shares bought back could exceed the maximum limit in case price falls below the floor price, which is Rs 1,850. Total buyback offer size is Rs 9,300 crore.
Independent expert Mahantesh Sabarad recommends not to tender shares in the Infosys buyback. He said, “As per the historical trend, expect the stock to inch higher post buyback as earnings per share go up, the balance sheet looks better, the return on equity looks better, and the buyback offer price is much above the market price. So you can expect to see a big premium.”
Rahul Jain, vice president of research (IT) at Dolat Capital, said as of today, he has a target price of Rs 1,650 on Infosys, “Hence, from a pure upside perspective, I don’t see much. With Infosys being a key component of the index, clients could continue to own it.”
The next trigger he is watching for is the FY24 forecast by the company. On an absolute basis, Infosys is not a big buy, and he maintains it as a preferred pick along with HCL Tech.