Infosys Ltd - Buyback

Infosys at its board meeting held on Aug 19, 2017 announced to buy back 11.30 cr shares (4.92% of its equity) through a tender offer at a price of Rs 1150 per share resulting in a total offer size of Rs 13,000 cr. The company has not indicated about the intention of promoters to participate (or not) in the offer.

SEBI in 2012 had amended the buy back regulations by passing SECURITIES AND EXCHANGE BOARD OF INDIA (BUY-BACK OF SECURITIES) (AMENDMENT) REGULATIONS, 2012 as per which small shareholder holding shares as on the record date of Rs.2 lakhs or less will get reservation in the buyback offers to the extent of 15% of the buyback size.

As per SEBI regulations, 15% of the offer size i.e. Rs 1950 cr will be reserved for small shareholders holding shares upto a value of Rs 2 lakhs as on the record date (which should typically be 53-77 days from the date of approval in the board meet).

Opportunity.

• We have studied the recent tender buybacks conducted by companies and feel that acceptance ratio for Infosys could be high. Most small shareholders do not take part in such offers with the result that the acceptance ratio becomes high. The data published by the companies on distribution of shareholding in their annual report gives us an idea on the likely acceptance ratio if all the small shareholders (holding from 1 to 200 shares) tender their shares in the buyback offer which works out to be 59% for Infosys. We don’t yet have the data of exact number of shareholders holding shares of market value of Rs.2 lakhs as on the record date.

• Infosys is buying back the shares at a premium of 27.8% to the current price of ~Rs 900 per share. Investors looking for short term opportunity can buy the shares (upto the value of Rs.2 lakhs – as on the record date) in the open market and offer them in the tender offer.

• Investors can earn an absolute return of 25-30% (subject to short term capital gains tax) over the next 4 months (average time taken from board approval to payout in recent tender offers) leading to an annualized return of 75-90% p.a.

• In another such huge buyback approved by TCS in Feb-17, only 21.4% (vs the theoretical ratio of 233.1%) of the outstanding shares held by shareholders holding less than 100 shares as per FY16 Annual Report were offered in the tender offer resulting in 100% acceptance ratio (vs theoretical acceptance ratio of 42.9% in case every eligible small shareholder tendered their shares). Hence it is very likely that acceptance ratio would be high (>59%); if not 100% even in Infosy.

• To view our Complete report Click Here.

How to Bid for buyback

 1. ITS (mPowered) - Trade instantly by logging into your account from our mPowered trading platform. Click Here to Login > Go to Equity > Buy Back > Dash Board

2. For placing your Buyback order through centralised dealing desk at 33553366 (prefix local code).

How To Apply in Buyback: