Q3 Results: Infosys Announces Rs 10,000-Crore Buyback, Special Dividend

Infosys Ltd. announced a share buyback and a special dividend as the cash-rich firm rewards shareholders for the second time in two years.

India’s second-largest information technology firm will buy back 10.3 crore shares representing 2.6 percent at not more than Rs 800 apiece, a premium of 17 percent as per today’s closing price. The repurchase will be worth Rs 8,260 crore, according to its exchange filing.

Infosys also announced a special dividend of Rs 4 per share and fixed Jan. 25 as the record date, and Jan. 28 as the payment date. The payout will be worth about Rs 2,107 crore.

Post the announcement, the FY20 average earnings per share estimate for Infosys increased 2.4 percent to Rs 42.7 apiece, according to analyst forecasts tracked by Bloomberg.

Interim Chief Financial Officer Jayesh Sanghrajka explained the company had to go for a mix of options before it opted for a buyback and dividend. He said it had announced returning shareholders Rs 13,000 crore as part of its capital allocation policy, of which it already paid Rs 2,600 crore as a special dividend at the start of the year. That left them with Rs 10,400 crore yet to be returned.

An open-market offer allows buying back only 15 percent of the share capital plus free reserves, which for Infosys would be been around Rs 8,500 crore. Hence, the company is doing a buyback worth Rs 8,260 crore and the remainder amount is being returned to shareholders as a special dividend.

Infosys had announced a payout of $2 billion (about Rs 13,000 crore) through buyback and dividend at the start of financial year 2019 as part of its policy to return 70 percent of free cash flow.

The company had announced its first-ever buyback worth Rs 13,000 crore in December 2017 and completed it in February 2018. It had then repurchased 11.3 crore shares at a pre-bonus price of Rs 1,150 apiece. The scrip went 1:1 ex-bonus in September last year.