The buyback comes at a time when Infosys shares have declined 19 per cent so far this year.
Information technology (IT) services major Infosys has announced repurchase of shares worth Rs 18,000 crore -- a decision that is likely to nudge its largecap peers to follow suit, amid a plunge in their share value.
The firm will repurchase 100 million shares at an average price of Rs 1,800 apiece, a 19.3 per cent premium to its closing share price of Rs 1,509.50 on Thursday.
This represents 2.41 per cent of the total number of equity shares in the company's paid-up equity capital, according to a release.
After the repurchase announcement by Infosys, more companies could come up with buyback offers, said Abhishek Pathak, vice president, institutional research analyst, Motilal Oswal Financial Services.
"But it's important to see this for what it is, largely a way to return cash to shareholders, rather than a signal about the business cycle," he added.
The Bengaluru-based firm utilised Rs 13,000 crore for its buyback in 2017, via tender offer, repurchasing 113 million shares at an average price of Rs 1,150 per share.
In 2019, Infosys spent Rs 8,260 crore to purchase 110.5 million shares for Rs 747 per share in the open market.
Similarly, in 2021 and 2022, the tech giant bought shares worth Rs 9,200 crore (55.8 million shares) and Rs 9,300 crore (60.4 million shares), respectively.
"Overall, the buyback is seen as very positive for Infosys, and more announcements from peers are also expected. Among them, Tata Consultancy Services (TCS) is one company to watch out for," a Mumbai-based senior market analyst said.
However, the sector remains volatile, and stock performance will depend on upcoming earnings in October, the analyst said.
Those at CLSA agreed. Infosys's share buyback proposal can trigger buyback talks at India's largest IT services company TCS as a confidence-building measure, amid an overall weak demand environment, they said in a note.
The buyback comes at a time when Infosys shares have declined 19 per cent so far this year.
The broader IT index has fallen over 17 per cent, making it the worst-performing major sector, compared to a 6 per cent rise in the Nifty50 index.
Feature Presentation: Aslam Hunani/Rediff
