Infosys share price came under pressure on Monday after the company announced its largest-ever share buyback of Rs 18,000-crore, with analysts pointing to tax implications as major dampener.
The board of the IT major on September 11 approved repurchase of up to 10 crore fully paid-up equity shares of face value Rs 5 each, representing 2.41 percent of the total paid-up capital, at a price of Rs 1,800 per share. The buyback price reflects a premium of around 18 percent over Friday’s closing price on the NSE.
At the end of the June 2025 quarter, Infosys reported free cash flow of Rs 7,805 crore.
Despite the announcement, the counter slipped 1.6 percent to an intraday low of Rs 1,501.20 on the NSE in today's trading session, reversing gains made in the previous session on Friday.
Analysts attributed the weakness to taxation rules and profit-booking. "The acceptance ratio is likely to be low and this coupled with taxation doesn’t make the buyback an attractive proposition in the secondary market," said Sunny Agrawal, Head – Fundamental Research, SBI Securities.
Tax Implications for Investors on Buybacks
Ajit Mishra, Senior Vice President – Research, Religare Broking, said investors’ decision to tender would largely depend on tax considerations. "Since October 2024, buyback proceeds are taxed as dividend in shareholders’ hands, making the offer less attractive for those in higher tax brackets. For low-tax or tax-exempt investors, tendering could provide gains if the acceptance ratio, particularly under the small shareholder quota, is favourable," he noted.
On Monday, IT stocks were broadly lower with the Nifty IT index slipping nearly 1 percent, led by selling across all 10 constituents. The decline came as global investors awaited US Federal Reserve cues on rate cuts.
Ruchit Jain, Vice President, Motilal Oswal Financial Services, said part of the positive impact was already factored in as reports on a buyback were circulating earlier. He added that the overall weakness in the IT sector had also weighed on sentiment.
Additional concerns emerged after US President Donald Trump’s recent remarks on potential tariffs on IT services imports, which analysts said could impact margins for Indian exporters. "Markets are pricing in the possibility of higher operating costs and slower client spending in the near term," said Harshal Dasani, Business Head, INVasset PMS.
Dasani added that currency movements were also being tracked closely. "An elevated INR against the dollar squeezes revenues when converted to rupees, putting short-term pressure on earnings," he said.
What Investors Should Do?
Experts suggested caution in the near term. "The buyback signals confidence, but short-term volatility is being driven by policy and currency shocks," said Dasani.
Mishra from Religare Broking added, "Long-term investors may simply hold, as the buyback reduces equity by 2.4 percent and modestly enhances EPS."
Infosys Buyback History
Infosys has previously undertaken four buybacks. The first was in 2017 for Rs 13,000 crore, followed by Rs 8,260 crore in 2019, Rs 9,200 crore in 2021, and Rs 9,300 crore in FY23.
What is a Share Buyback?
A share buyback is a process where a company repurchases its own shares, reducing the number of outstanding shares in the market.
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