Expert opinion on Infosys buyback offer of Rs 1,150 per share

Infosys today offered to buyback equity shares not exceeding Rs 13,000 crore at a price of Rs 1,150 per share. This translates to 4.92 percent of the total paid up capital. The price offered is at 17.73 percent and 17.92 percent premium on the BSE and NSE, respectively from its last closing price on August 16 when the company first announced its intent to buyback .

Below are comments from experts & analysts:

Sandip Agarwal, VP-Wholesale Capital Markets, Edelweiss Financial Services

"I think people were expecting a much higher price for the buyback and that is the way I would put but after yesterday's correction, this also looks quite decent from that perspective but earlier the rumours were around Rs 1,250-1,225 because the two buybacks which we have seen, they have been broadly above the last maximum price at which they have traded. So Tata Consultancy Services (TCS) was at Rs 2,850 and even HCL Technologies was Rs 1,000, so people had built in expectation of a much higher premium but after yesterday's correction even this premium looks good."

Mohandas Pai, Former HR Head, Infosys

"It is a very conservative company which wants to hang on to cash. Yes, we are also part of that conservativeness which held on to cash when we were there but at least growth rate was much higher. Growth rate has come down, so capital allocation becomes very important. I think it is a decent stock, so hopefully 4.92 percent of the stock will come down because they will buyback and they should have a regular policy of buying back stock and giving dividend so that 75-80 percent of the cash generated will be flown back and the balance can be used for acquisitions or whatever, there is enough money in the company and they have an opening balance kitty so that over the next three-four years at least 15-20 percent of  the stock is bought back, so that every year earnings per share (EPS) can grow."

Amit Tandon, MD, IIAS

"I think at the moment the price is reasonably fair. Market is always expecting little bit more, they ask for more dividends, more frequent bonuses and in line with that clamour they are now asking for a high price at the buyback. It is one of the long standing demands of investors. Infosys has a fairly large stock pile and earlier this year when they first made their statement about buyback and did kind of left reasonably vague; they hadn't specified what is the amount which will be there for buyback and what would be there for dividend. So we like the clarity and I am sure the investors will also like the clarity.

I will kind of echo what Mohan (Mohandas Pai) is saying that this needs to not be a one-off but it should be something which investors should expect at frequent intervals given the fact that the company is accumulating cash at a fairly fast pace and has not been able to deploy it elsewhere. So it is bringing down its ratios and it is weighing down the company's price performance."

Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs, IIFL

"I think Rs 1,150 is shorter than what happened yesterday. If this has happened day before yesterday, you would have got Rs 1,200 definitely, but not withstanding I would expect everyone to tender whatever the percentages will go. So it will be about 11 percent on a rough calculation; 11 percent which will be accepted and that will give some solace to shareholders but this company came as an initial public offering (IPO) in 1993 at Rs 93 and the issue was not fully subscribed and today Rs 9,300 is almost Rs 3 crore. So the biggest wealth creator has become courtroom and boardroom battle which is telling you that when dirty linen starts getting washed in public, it is a beginning of an end. So I think the past is over.

Till we do not get more clarity this type of litigation and counter allegations will continue to put a bad name and uncertainty is going to drag down the stock. So we think this is the best opportunity, for anyone who holds, to exit at best possible price."

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