Information technology major Infosys will consider a proposal for a share buyback on October 13, the company said in a stock exchange filing on October 10.
“...the Board of the Company will consider a proposal for buyback of fully paid-up equity shares of the Company at its meeting to be held on October 13, 2022,” Infosys said. The company is scheduled to announce its results for the second quarter of FY23 on the same day.
This comes after brokerage firm Jefferies in its results preview for the sector had said that Infosys could announce a buyback. The firm expects that the buyback will be valued between Rs 8,700 crore and Rs 9,500 crore.
A note by Jeffries said that the focus for this quarter will be on management commentary on the demand environment — on the deal pipeline, sales cycle, nature of deals and deal tenure, pricing, and vendor consolidation, as well as a focus on commentary around client spends.
“We expect aggregate revenue growth of 3.6% QoQcc for IT companies under our coverage, in line with last quarter, driven by deal ramp-ups. Among large IT firms, we expect Infosys to deliver the highest organic growth (+4% QoQcc),” the note on the preview for the second quarter said.
Margins of IT companies have been under pressure and wage pressures have persisted as well, but an improving pyramid, operating leverage, and pricing will help with a slight recovery in margins on a quarter-on-quarter basis.
“Focus will be on demand outlook, nature of deals, pricing and attrition trends, and potential buyback for Infosys. Remain cautious on the sector,” Jeffries’ analysts had said.
Infosys had completed its last share buyback of Rs 9,200 crore in September 2021, and a minimum of one year is mandated between the end of the last buyback and the announcement of a new one. Prior to 2021, Infosys completed a buyback in 2019 of Rs 8,260 crore and in 2017 of Rs 13,000 crore.
A company repurchases shares back from shareholders during a buyback, usually at a premium as compared to the prevailing market price. Buybacks are an alternative tax-efficient way to return money to shareholders, and the objective is to also help arrest the fall in the value of the stock.
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