Here are the key features:

• Buyback price: ₹1,800 per equity share.
• Premium offered: The premium was approximately 19 per cent higher than the market price prior to the announcement.
• Shares to be bought back: 10,00,00,000 (10 crore) fully paid shares.
• What % of equity: Approximately 2.41% of its paid up equity capital.
• Mode: Tender offer route (during the buyback period, shareholders are able to tender (offer) their shares at the fixed price).
  

Why Infosys Did It

Infosys has a few reasons as to why they chose to do such a big buyback now:

1. Return cash to shareholders: Infosys is in good health in terms of free cash flows and reserves. One method of repatriating excess funds to investors is through buyback.
   
   
2. Boost shareholder value: Under buyback, the outstanding shares decrease. This is likely to enhance earnings per share (EPS), and may enhance the return on equity (ROE).
   
   
3. Signal of confidence: The company itself is confident in its own financial performance and long-term prognosis, a phenomenon that is particularly relevant when some investors are concerned about slower growth or macroeconomic issues in the IT industry around the world.
   
   
4. Valuation premium: This will attract shareholders to take part by giving them a premium. It demonstrates impartiality to the shareholders who may desire to liquidate.
   
   
5. Policy alignment: Infosys has a capital allocation policy which is to give out approximately 85% of the free cash flow over a period (dividends + buybacks). This action is in line with such policy.
   
   

Details: How It Works & Impact

These are the mechanics and its implication to shareholders and the company:

• Record Date: Infosys will give a record date. The shareholders at that date can come forward.
  
• Pro-rata acceptance: In case the number of shares offered out by shareholders exceeds that of those that Infosys wishes to purchase, then the acceptances will be made on a pro-rata basis. That is to say that individual shareholders contribute a part of their shares.
  
• Funding: The repurchase will be done in cash, free reserves (excess cash not required in operation). Infosys has reported large amounts of cash and cash equivalents to justify this.
  
• Effect on shareholding: Equity capital decreases a little after a buyback, ownership percentage is changed a bit less conspicuously since the number of shares in the market will be lower.
  
• Effect on share price: The share price has already been affected--the share price has gone up by approximately 2 percent due to the news. However, the long term returns are based on the performance of the company, the mood of the investors and market conditions.

Market Context & Why It’s Big

• This is the biggest buyback of Infosys. Its previous buyback (2022) was ₹9,300 crore. So this ₹18,000 crore one is two times bigger.
  
• The move is made at a time when the Indian IT industry is experiencing a slight deceleration in growth particularly in FY25, with stained demand, forex headwinds and macroeconomic doubts. Buyback therefore, comforts the investors.
• Infosys is heading a trend compared to peer IT companies: other large companies can also look at buybacks or dividends to ensure investor interest.

Possible Advantages & Risks

Advantages

• Increase in EPS and ROE (reduced number of shares outstanding will tend to raise these measures).
  
• The shareholders who decide to tender their shares attract handsome short-term payout.
  
• Confidence signal: Indicates the market that the company feels that its stock is underestimated.
  
• Efficient capital usage: Cash is not kept lying around since it is given back to owners.
  
  

Risks / What to Watch

• In case it grows even slower, cash investments in innovation (AI, products, M&A) may be a superior long-term solution than buybacks. This has been an issue that has been brought out by some analysts.
• Higher prices can build high expectations; in case the performance of the company decreases, the shareholder is likely to demand additional buybacks or dividends.
• The challenges facing the global IT sector (currency fluctuations, competition, regulation) may diminish margins, and impact returns.

What Shareholders Should Do

• People in need of liquidity or ones who believe that the stock is on the high side may tender shares.
• The long-term holders also have to look at the value holding vs selling at premium. Providing they have confidence in the future of Infosys, remaining invested could gain more than the buyback.
• Know tender period, record date and the number of shares that one is eligible to get accepted.

Summary Table

Conclusion

The share buyback of ₹18,000 crore byInfosys is a giant step. It is the biggest-ever buyback by the company and it is providing shareholders with a 19 percent premium and is expected to have a positive effect on the stock in the short run. It demonstrates good financial health, and appears to compensate investors and increase confidence in the face of sectoral pressures.

Simultaneously, it also begs the question: is this how the cash should be used at the time when such technologies as AI and cloud require significant investments? Would the firm continue to grow in the case of a slowdown in reinvestment?

This is good news to many shareholders, in particular those who are keen on value or income. However, it has to be considered with heavy weight against long-term

Stay with us for more.

FAQs – Infosys’s ₹18,000-Crore Buyback

Q- 1. What exactly is the Infosys ₹18,000-crore share buyback?
Ans- It is a resolution that has been passed by the Infosys board to buy back the shares at a value of ₹18,000 crore to the current shareholders at a price of ₹1,800 per share. It will be through the tender route and will amount to approximately 2.41% of the existing equity.

Q-2. Why is Infosys offering ₹1,800 per share?
Ans- ₹1,800 is approximately 19% more than the pre-announcement share price. It is a premium which is paid to make the offer appeal to the shareholders.

Q-3. How many shares will Infosys buy back, and what share of the company will that represent?
Ans- Infosys will repurchase 10 crore shares (100 million) which is approximately 2.41 percent of its paid-up equity capital.

Q-4. How will shareholders benefit from this buyback?

• Tendering shareholders will receive  ₹1,800 per share, i.e. at a premium.
  
• Reduced number of shares outstanding implies measures such as earnings per share (EPS) become better.
  
• It is possible that the stock price will go up because of positive sentiment.
  
• It is a good alternative when one wants to be liquid or have a short-term opportunity.
  

Q-5. Are there any risks or concerns with this buyback?
Ans- Yes. The potential disadvantages: companies could have spent this cash on R&D or AI or other areas of growth; market expectations will be high; also, in case of less people tender, one can accept on a pro-rata basis so only a fraction of the shares they offer will be accepted. Further, the stock markets occasionally rectify following a surge in the market.