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Infosys' plan for a USD 2-billion buyback may have hit a snag due to clearance issues on its American Depositary Receipts (ADRs) from the US market regulator Securities and Exchange Commission.
As per norms if ADR holding is more than 10 percent of a company's share issue then it is required to either seek an exemption from the SEC or must launch a buyback for the ADRs also.
In April, Infosys had approved Rs 13,000 crore reward for its shareholders in this financial year via buyback or dividends. However, ADRs (along with European Depositary Receipts) constitute nearly 17 percent of the company’s shareholding.
Market regulator of India Securities and Exchange Board (SEBI) is also said to be awaiting clearance from the US SEC before approving the buyback, a source-based report in the Business Standard said..
The Bengaluru-based IT company had appointed lawyers and bankers to look into the buyback.
While SEBI requires companies to set aside 15 percent of the buyback for small shareholders, no such provision is there by SEC. Also, SEBI allows 10-day window for buyback while SEC has 20 days period.
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