Infosys mulls Rs12,000-cr share buyback: report
08 February 2017
Amidst concerns of corporate governance failures (See: Infosys CEO Vishal Sikka falls foul with founder directors), IT major Infosys is reported to be looking at a Rs12,000-crore share buy-back programme to optimise stock value, CNBC TV18 reported citing unidentified sources. The news helped the company's stock to rise 0.75 per cent to Rs942.25 on Tuesday, compared to the previous close.
Infosys is sitting on a cash pile of an estimated Rs38,000 crore and the buy-back will still leave the company with Rs26,000 crore cash on its books.
At the same time, the share buy-back will reduce the availability of the stock in the market, thereby allowing for a price optimisation of its stocks.
A New India Express report quoting company sources, meanwhile, said, ''something could come up'', without divulging more details.
It also stands to reason that with the government starting to charge 10-per cent tax on dividends, buyback is an alternative and cost-effective way for the companies to reward investors.
In the quarter-ended December, Infosys had paid interim dividend, including tax of Rs3,029 crore, according to the company's official statement. Infosys saw a 0.2 per cent sequential decline in its revenues in the quarter.
Infosys had also revised its revenue guidance for FY17 from 8- 9 per cent to 8.4- 8.8 per cent.
Infosys' shareholders have been demanding a share buyback for a few years, and CNBC TV18 said that the company's top management is now seriously considering it.
Infosys shares rose on the news amid weaker markets, and ended up 1.1 per cent to Rs944.75 on the BSE.
Indian IT companies are facing global headwinds from events such as US President Donald Trump's policies and his stance on H-1B visas. Last week, a new bill, proposing to more than double the minimum wages to $130,000 for foreigners working in the US under the H-1B visa, was tabled in the House of Representatives.
The proposed changes in the visa regime may result in higher operational costs and shortage of skilled workers for the $110 billion Indian outsourcing industry.