What does Infosys buyback mean?
The buyback will cover 2.41% of Infosys’ outstanding equity, directly benefiting the company’s 26 lakh shareholders. For those who participate, it’s an immediate arbitrage opportunity, selling shares back to the company at Rs 1,800 when the market price is around Rs 1,511.
“This buyback could support the stock price in the near term by boosting EPS by 3-5%,” said Akshay Badjate, Fund Manager at Merisis PMS, pointing to the company’s robust financial position with “over Rs 40,000 crore in cash and liquid investments.”
Also Read | Infosys announces its biggest-ever share buyback of Rs 18,000 crore at 19% premium
Why is Infosys doing a buyback now?
The timing appears strategic. Foreign institutional investors have been selling Indian IT stocks, with an outflow of Rs 19,901 crore in July, followed by Rs 11,285 crore in August. Analysts see the buyback as management’s vote of confidence.
“Given current timing amid heightened macro uncertainty around tariffs etc, see this as a vote of confidence on stability in F26 guidance in upcoming results,” noted Morgan Stanley, which maintains an Equal Weight rating with a target price of Rs 1,700.This marks Infosys’ fifth buyback – the last was in 2022, worth Rs 9,300 crore through open market purchases. However, this latest buyback will be conducted through the tender offer route, unlike the company’s last three buybacks, which were all through open market transactions.The buyback fits into Infosys’ broader capital allocation policy of returning 85% of free cash flow to shareholders over FY25-29. The company returned about 52% of its FCF through dividends in FY25.
What should Infosys investors do?
Nomura analysts calculate that “with today’s announced buyback and our expected dividend of Rs 55/share, we estimate Infosys to return greater than 100% of its FY26F FCF to shareholders.” The brokerage maintains a Buy rating with a target price of Rs 1,880.
The company generates “more than Rs 30,000 crore in annual free cash flow” and currently offers an attractive dividend yield of 4.4%.
Nomura has a buy call on the stock with a target price of Rs 1,880, saying that the buyback would be largely EPS-neutral in FY26. Morgan Stanley, which has a target price of Rs 1,700, said it could take 3-4 months for the share repurchase program to get fully executed.
Jefferies has reduced the target price for Infosys from Rs 1,860 to Rs 1,750. “Amid a weak growth outlook and high uncertainty, large-cap IT stocks are likely to remain range-bound. Among them, we like Infosys and HCL Tech due to their relatively lower exposure to AI-led revenue deflation, which should support relatively higher (6–7%) earnings growth,” it said.
Despite the capital return, growth remains modest. Nomura expects Infosys to post 3.8% year-on-year USD revenue growth in FY26F, including around 40 basis points from acquisitions (excluding the recently announced Versent deal).
While the buyback provides near-term support, some question the long-term strategy. Badjate cautioned that “from a longer-term perspective, it would have been better if management had laid out a clear plan for investing excess cash into emerging technologies such as AI research, quantum computing, or strategic investments in startups.”
For shareholders, the buyback represents immediate value creation through the premium offered, potential EPS accretion, and continued high dividend yields—providing multiple ways to benefit from Infosys’ cash-rich position in a challenging market environment.
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