Infosys: Is the IT major gearing up for a buyback?

In the last five years, the company has conducted three buybacks. The largest one – worth Rs 13,000 crore was launched in November 2017, followed by Rs 8,260 crore issue in March 2019 and Rs 9,200 crore issue in June 2021.

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As the earnings season draws closer, chatter over a possible buyback from the second-largest IT services company Infosys is gathering pace. Global brokerage firm Jefferies is the latest to join the discussion.

“Infosys could announce a buyback along with its Q2FY23 results,” Jefferies said in an earnings preview report. The broker did not comment on the expected size or pricing of the issue.

Buyback is the most tax-efficient way to distribute cash to shareholders. It is also used by some companies to arrest share price fall as it attracts more investors. Infosys is among the scrips that have seen selling pressure during the entire calendar year.

Bloomberg data shows, as of FY22-end, Infosys’ total cash and equivalents were at Rs 24,145 crore. In its board meet intimation, the company has not said buyback is on the agenda.

Kranti Bathini, Director at WealthMills Securities, too, echoed a similar view. “I think they will discuss it (buyback) during the next board meeting,” Bathini added.

In the last five years, the company has conducted three buybacks. The largest one – worth Rs 13,000 crore was launched in November 2017, followed by Rs 8,260 crore issue in March 2019 and Rs 9,200 crore issue in June 2021.

Infosys is scheduled to announce its September quarter earnings on October 13.

Jefferies said it expects aggregate revenues for the IT services sector to be steady at 3.6 percent QoQ, led by Infosys and Coforge.

Specifically, on Infosys, the brokerage said it expects Q2FY23 revenue growth to be strong at 4 percent QoQ, driven by deal ramp-ups and seasonal strength.

“We expect Ebit margins to expand by 30bps QoQ, driven by pyramiding, operating leverage and pricing benefits, amidst supply side pressures, higher costs and continued investments in growth. We expect Infosys to retain its 14-16 percent YoY revenue growth guidance and 21-23 percent margin guidance,” it said.

The stock ended 1.11 percent higher at Rs 1,413 on BSE.

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