Investors can earn an absolute return of 25-30 percent (subject to short term capital gains tax) over the next four months leading to an annualized return of 75-90 percent per annum while on the flip side acceptance ratio is likely to drop if a lot of new investors buy at current price with the objective of tendering the shares in buyback.
Infosys at its board meeting held on August 19, 2017 announced to buy back 11.30 crore shares (4.92 percent of its equity) through a tender offer at a price of Rs 1150 per share resulting in a total offer size of Rs 13,000 crore.
As per T+2 settlement period, investors purchasing the stock upto and on October 30, 2017 shall be eligible to participate in the offer. This record date will also be for determining the eligibility of investors who are entitled to receive interim dividend to be decided at the board meeting to be held on October 24, 2017.
Research and Broking firm HDFC Securities has come out with an outlook on this buyback offer and feels that acceptance ratio for Infosys could be high. It believes that most small shareholders do not take part in such offers with the result that the acceptance ratio becomes high adding that the likely acceptance ratio if all the small shareholders (holding from 1 to 200 shares) tender their shares in the buyback offer works out to be 59 percent for Infosys.
With Infosys buying back the shares at a premium of 27.8 percent to the current price of around Rs 900 per share, investors looking for short term opportunity can buy the shares (upto the value of Rs 2 lakhs – as on the record date) in the open market and offer them in the tender offer. Investors can earn an absolute return of 25-30 percent (subject to short term capital gains tax) over the next four months leading to an annualized return of 75-90 percent per annum, the research firm said.
HDFC Securities is of the view that post March 2017, if a lot of new shareholders have been added (holding less than 200 shares) then the acceptance ratio could be less than stated above.
Similarly if a lot of new investors buy at current price (from now till the record date) with the objective of tendering the shares in buyback then the acceptance ratio is likely to drop.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.