Infosys investors eye special dividend, buyback

Just before Infosys announces its quarterly earnings, the investor community is abuzz with hopes the information technology (IT) giant might reward shareholders.

Owing to the strong cash pile the Bangalore-based company has been sitting on, the market is abuzz with talk it might announce a special dividend or a share buyback. As on June 30, Infosys held cash and cash equivalents of about Rs 24,078 crore.

“Given Infosys will cross the landmark of $2 billion in quarterly revenues in the second quarter, we think the company could announce a special dividend in addition to the interim dividend (we factor in Rs 18, which is up 20 per cent year-on-year) that it normally announces,” Vishal Agarwal, equity analyst at brokerage house Jefferies, said in a report.

The Bangalore-based company had posted a revenue of $1,991 million (Rs 11,267 crore) for the quarter ended June. Experts are hopeful the company would post strong growth for the September quarter, aided by the rupee’s depreciation, a rise in demand and improved macroeconomic conditions in the US and the UK. The last time Infosys had announced a special dividend was during the announcement of its annual results for 2011-12. While rumours of a share buyback by Infosys had surfaced several times, senior company officials had brushed these aside.

“In the company’s conversations with the analyst community, noise for a special dividend has been much louder than that for a buyback. Over the past year and a half, hopes for a special dividend have risen a lot,” said a Mumbai-based analyst with a domestic brokerage.

“While a buyback looks more like a rumour, there is logic behind expectations of a special dividend.” Experts believe Infosys might not look at a buyback at the current juncture, considering its stock has risen through the past few weeks on signs of a revival in demand.