BENGALURU: In a bid to optimise the value of its stock, information technology major Infosys is likely to consider a share buyback worth Rs 12,000 crore, CNBC TV18 reported on Tuesday citing unidentified sources.
The news generated ripples in the market even as the company’s shares rose 0.75 per cent on Tuesday to Rs 942.25, compared to the previous close. At present, the company is estimated to have about Rs 38,000 crore cash on its books.
When a company buys back its stocks, it reduces the availability of the stock in the market, thereby allowing for a price optimisation of its stocks.
When Express contacted Infosys, the company said it had no comments to offer. On the other hand, sources told Express that “something could come up”, without divulging more details. Amid speculation, traders were hopeful for the stocks as there was a positive sentiment.
“Technically, the market looks attractive for buyers. Today, the market witnessed a spike at the closing note in the last half an hour. The market will further go up. I am very positive as far as the sentiment is concerned. We have given recommendations for people to buy the stock a couple of days before,” said Valar Murugan, Valar Murugan, senior technical analyst at EQSIS, a capital market research firm.
He added that in the coming days, buyback would not be an extraordinary case but an ongoing process.
“This is because the government has started charging 10 per cent tax on dividends. Buyback is an alternative and cost-effective way for the companies.”
In the quarter-ended December, Infosys had paid interim dividend including tax of Rs 3,029 crore, according to the company’s official statement. Infosys saw a 0.2 percent sequential decline in its revenues in the quarter.
Following projections of modest growth across companies this season, Infosys had also revised its revenue guidance for FY17 from 8- 9 per cent to 8.4- 8.8 per cent.
The news of Infosys considering a buyback of shares comes at a time when the stocks of rating agency ICRA, too, went up following an announcement by the firm that it was considering buyback of its shares.