Infosys Ltd. will consider its first share buyback in three years on Thursday, with the plan likely to be worth around Rs 13,560 crore, according to NDTV Profit. The buyback is estimated to be priced at an average premium of 25 percent.
Historically, Infosys allocates about 30 percent of its cash for buybacks and repurchases nearly 14–15 percent of its net worth. As of Q1 FY25, the company held cash and equivalents of Rs 45,200 crore and net worth of Rs 95,350 crore. Its last buyback was in October 2022, and this will mark the fifth since 2017. Analysts note that such a move could help cushion the impact of global economic volatility. The capital return program was outlined by Infosys in Q4 FY24.
Morgan Stanley’s View
Morgan Stanley highlighted that Infosys aims to return 85 percent of its free cash flow to shareholders over five years through dividends, buybacks, and special payouts. The brokerage expects this buyback to account for 1.3–2 percent of total equity.
Consensus estimates peg Infosys’ target price at Rs 1,743, implying a 21.6 percent upside. The highest target price is Rs 2,085 (upside of 45.5 percent), while the lowest stands at Rs 1,440 (barely 0.5 percent upside).
Context in the IT Sector
This would also be the first large IT sector buyback in two years, following multiple buybacks by peers such as TCS and Wipro between 2016 and 2023. Infosys’ move comes at a time when the Nifty IT index has slumped 21 percent year-to-date, making it the worst-performing sector. Infosys shares have fallen 24 percent this year, closing Monday at Rs 1,436 apiece, down 0.59 percent.
Outlook
Infosys has lagged most large-cap peers over the past six months. However, analysts believe the buyback could provide near-term support to the stock, given its relatively inexpensive valuation. Morgan Stanley expects Infosys’ share price to outperform the broader market index over the next two months, with the buyback signaling management confidence in revenue and margin guidance. The brokerage, however, remains “equal weight” on the stock.
