Infosys Alert: Promoters Nandan Nilekani, Sudha Gopalakrishnan To Avoid Rs 18,000 Cr Buyback; Stock Jumps 5%

Share price of Infosys skyrocketed by 5% on October 23, after the mega tech filed the draft version of its Rs 18,000 crore buyback to the US SEC and other exchanges. From the latest update, promoters and promoters' groups, such as Nandan Nilekani, Sudha Gopalakrishnan and Rohan Murty, among others, have decided to avoid the buyback. The announcement led to strong buying in Infosys as market opens after two-days holiday.

Infosys Share Price:

At the time of writing, Infosys shares traded at Rs 1542.50 apiece, up by 4.79% on BSE, with market cap of Rs 6,40,400.97 crore. The stock is near its intraday high of Rs 1543.50 apiece. As of October 23, Infosys holds a strong return on equity (ROE) of 40.14%.

Infosys Buyback:

The IT player has announced a buyback of Rs 18,000 crore, at a share price of Rs 1,800 which is at a premium from current levels. The buyback represents o 2.41% of the total number of Equity Shares in the existing total paid-up Equity Share capital.

In its regulatory filing on October 22nd, Infosys said, ''We would like to inform you that, a draft version of the Letter of Offer is being filed with U.S. Securities and Exchange Commission ("SEC") for U.S. regulatory purposes."

This upcoming buyback will be the fifth share repurchase by Infosys. Since 2017, Infosys has delivered four buybacks, with the latest one held in 2022. Infosys carried a buyback of Rs 9,300 crore in 2022, at a minimum buyback price of Rs 1,850 per share, which was at a premium from its trading price. This buyback was open from December 7, 2022 to February 13, 2024, and Infosys bought back at least 50 million equity shares from shareholders.

Infosys Promoters And Buyback:

The draft of Infosys buyback said, ''The Promoter and Promoter Group and persons in control of the Company have an option to participate in the Buyback.''

It added, ''Since the Promoters and Promoter Group of the Company have declared their intention to not participate in the Buyback, Equity Shares held by them has not be considered for the purposes of computing the entitlement ratio."

Among the largest promoters of Infosys are ---- Sudha Gopalakrishnan, Rohan Murty, and Nandan M Nilekani.

As of now, Sudha Gopalakrishnan holds 9,53,57,000 equity shares or 2.30% in Infosys, while Murty holds 6,08,12,892 or 1.46% shares in the company. Nilekani holds 4,07,83,162 equity shares or 0.98% of Infosys.

Other promoters of Infosys are ---- Akshata Murty, Asha Dinesh, Sudha N Murty, Rohini Nilekani, Dinesh Krishnaswamy, S Gopalakrishnan, Shreyas Shibulal, and Narayana Murthy.

In total there are 26 investors part of Infosys promoters and promoters group. Together, they hold 54,20,29,249 equity shares or 13.05% in Infosys.

As per Infosys buyback draft, assuming participation in the Buyback is to the extent of 100% (full acceptance) from all the other Eligible Shareholders up to their Buyback Entitlement, the aggregate shareholding of the Promoters and members of the Promoter Group after the completion of the Buyback shall increase to 13.37% of the post- Buyback total paid-up Equity Share capital of the Company from 13.05% of the pre-Buyback.

Share buyback is important for investors because the listed company buys back its own shares from shareholders, generally at a premium price.

Buy/Sell Infosys Share Price?

After Q2 results, Pritesh Thakkar, a Research Analyst at PL Capital said, "We believe, unless the AI deployment re-prioritized to growth initiatives, keeping the topline stable and predictable would be challenging. Although the large deal TCV was strong in Q2, the usual furloughs and holidays impact would weigh on the topline in H2. With the revised guidance, the ask-rate for the rest of the year translates to -0.3 to -1.5% CQGR. We are passing on Q2 revenue beat, while we expect the large deal (announced off late) ramp up to partially support the topline in H2. On margins, slight escalation on subcon and lower utilization pressurized margins in Q2, although project Maximus and currency tailwind offset the drag."

"H2 is expected to be weak and over-utilization of levers would provide lesser headroom for margin improvement. We are baking in revenue growth of 2.5%/5.8%/6.7% CC YoY and margin improvement of 10/50bps/40bps YoY in FY26E/FY27E/FY28E, respectively. We retain our "BUY" rating with TP of Rs. 1,780 (earlier Rs. 1,760)," analyst added.

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