Infosys may go TCS way with $2.5 billion share buyback offer in April, says report

Bengaluru-headquartered software firm Infosys Ltd may follow in the footsteps of its rival Tata Consultancy Services and soon announce buyback of its shares.

The share buyback may happen as early as April, and the company is likely to set aside $2.5 billion for the same, The Economic Times report said.

The buyback indication came after the company’s board today said it will seek shareholders approval through postal ballot with regard to adoption of new Articles of Assocation instead of the current one. The proposal being mooted will allow the new Articles of Association to include provision for a buyback written into it, the ET report added.

Of late, Infosys board has been under increasing pressure, especially, from its founders for failing to meet highest corporate governance standards and lack of road-map in its capital allocation policy.

If Infosys goes ahead with its buyback plans, it will surpass the offer made by TCS. While TCS board recently cleared its proposal to buyback its shares worth Rs 16,000 crore, Infosys offer will amount to Rs 16,700 crore.

Recently, TCS said in a stock exchange filing that its board approved buyback of up to 5.61 crore shares, or 2.85 percent of its share capital, at Rs 2,850 apiece.

The decision comes at a time when India’s famed IT sector is under pressure of losing revenue from its clients in the US, which accounts for 65 percent of of the $155 billion industry, under President Donald Trump’s protectionist measures.

Large Indian IT firms are facing pressure from shareholders to announce dividends and buybacks as most of them are sitting on huge cash pile that has remained unutilised for years.

The buyback trend started when Cognizant earlier this month said it would dole out $3.4 billion to shareholders in the form of dividends and buybacks, after activist hedge fund Elliott Management questioned the company’s capital-allocation policy.

As of 31 December, TCS had $5.69 billion in cash and cash equivalents, Infosys had $4.48 billion of cash and investments on its books. and Wipro had $4.88 billion, according to a ET report.