The question now for many shareholders is whether they should tender their shares or sit tight. Market experts believe the buyback offers both near-term gains and a sense of stability for long-term investors valuing the stock amid a soft demand environment for IT services.
“For long-term investors, the buyback can act as a psychological framework for shares, with the Rs 1,800 buyback price serving as a key reference point. It also gives shareholders an opportunity to tender shares at an attractive premium if they want to book profits,” says Hariprasad K, research analyst and founder of Livelong Welong. He added that despite near-term challenges, Infosys continues to maintain strong fundamentals, supported by a healthy order pipeline, steady cash flow and its global position as a trusted technology partner. “The buyback reflects management’s view that these strengths will translate into continued growth as technology spending revives and AI adoption creates new opportunities,” he added.
Brokerage commentary also suggests that small shareholders may see modest but assured returns. Axis Securities said in a report in September when the buyback was announced, “We expect a return of 0.6%-1.7% for small shareholders in the next 3-4 months, assuming the post-buyback price as the current market price. However, if the post-buyback price is at Rs 1,650/250/2000 it could result in a return of 8-9%.” To be sure, the share price hasn’t been largely flat since September’s level and reflects the expectation of limited but clear gains that tendering shareholders can hope for.
The broader significance of buybacks, however, goes beyond short-term returns. Analysts point out that it signals confidence from management at a time when the global IT spending cycle remains uncertain. “Infosys’ Rs 18,000 crore buyback can be seen as both a sign of confidence and a capital-allocation,” says Ajit Mishra, SVP of Religare Broking. According to him, the premium buyback price indicates that the company’s medium-term growth path is intact despite muted near-term demand. At the same time, he notes that the weak revenue outlook for the IT industry and Infosys’ strong cash position This makes buybacks a sensible method of returning capital to shareholders when opportunities for large organic growth are limited.
However, Mishra points out that while the buyback will support metrics like EPS and return on equity, the meaningful lift will be more financial than operational. “In essence, it reflects optimism about the future while acknowledging today’s restrictive deployment pathways,” he says. Despite slower revenue growth, the buybacks should reduce the equity base and give Infosys’ EPS and return ratio a modest boost. Return on equity is also likely to improve marginally as additional cash is retired. However, Mishra cautions that the impact will be incremental, not transformative, as the size of the buybacks, while meaningful, cannot offset the drag from the sluggish IT spending environment.
Even though earnings are under pressure, analysts believe Infosys is in relatively good shape. The company continues to benefit from demand in areas such as cost optimization, cloud modernization and vendor consolidation, even as discretionary spending slows where budgets are still being allocated.
Mishra adds that given this backdrop, buybacks may offer only temporary support for the stock. While that signaled confidence and lifted key financial metrics at the margin, those improvements alone were not strong enough to trigger a significant re-rating. He added that over the next few quarters, valuations will depend on signs of demand revival, deal ramp-up, discretionary budgets, movements in margins, utilization trends and clarity around FY26 growth.
Market watchers also draw comparisons with the last buyback. “The last buyback, which happened around three years ago at Rs 1,850, didn’t really help the stock deliver much in the medium to long term. However, the current scenario looks different – valuations are more attractive now than they were then, and the stock is consolidating at long-term lows,” says market expert Neeraj Dewan.
This is Infosys’ fourth buyback since 2017. Earlier in 2017, the company had paid Rs. 13,000 crore, in 2019 Rs. 8,260 crore and in 2022 Rs. 9,300 crore was bought back. Interestingly, this is Infosys’ first tender-offer after its three re-buybacks in 2017 at Rs. Subsequent buybacks were done through the open market.
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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