Infosys, India's second largest software services provider, is sitting on a cash pile of Rs 22,000 crore and reports suggest the company could be more open to returning some of the cash back to its shareholders now.
The company has typically been conservative when it comes to dipping into its reserves. It acquired Swiss enterprise software consultancy Lodestone Holding in 2012 for Rs 1,925 crore and would usually rather wait for an acquisition to come by, or just hold cash at a time the global economic environment remains uncertain.
But are things likely to change? A report by The Economic Times quotes CEO SD Shibulal as saying "he would never say never to a share buyback."
However, in a recent interaction with CNBC-TV18, he remained cautious over spending and investment by clients in the near-term.
"We continue to see clients are taking a longer time for decision making...their ability to long-term investments are low," Shibulal said.
The India's second largest software services exporter, surprised the street last month with better-than-expected results for the third quarter and also raised its full year guidance, contrary to most analysts who were expecting a cut.
The company has also indicated that it would like to maintain EBIT margins in the mid-20 percent range, which analysts have said is realistic.
Infosys is likely "turning the corner" with a revival in its bread-and-butter business last quarter, flexibility in deals, improving win rates, embracing a more realistic margin profile and attempting to re-engage with employees, JP Morgan analysts Viju George and Amit Sharma said last month.
Once the bellwether, Infosys has been a laggard over the last couple of years, as slowdown in decision making and cut in spends by clients, hurt. But the company has now become more aggressive, and is also more flexible on pricing, analysts have pointed out, to gain back business.
The company will announce its fourth quarter results next month. The shareholders would be keen on getting a bigger slice of the cash pile.
Infosys shares were slightly up at Rs 2,864.15 on NSE. The stock has gained over 23 percent since end of Dec.
Infosys stock price
On November 27, 2015, Infosys closed at Rs 1066.30, up Rs 13.10, or 1.24 percent. The 52-week high of the share was Rs 1219.00 and the 52-week low was Rs 798.21.
The company's trailing 12-month (TTM) EPS was at Rs 66.53 per share as per the quarter ended September 2015. The stock's price-to-earnings (P/E) ratio was 16.03. The latest book value of the company is Rs 209.27 per share. At current value, the price-to-book value of the company is 5.10.
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