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Infosys tanks to three-year low, skids 4% despite buyback

LiveMint logoLiveMint 21-08-2017 Nasrin Sultana

Mumbai: Shares of Infosys tanked to three-year low at Rs882.55 a piece, down 4.3% intraday on Monday despite a Rs13,000-crore buyback the company announced last week. The stock has been under continuous pressure following chief executive officer Vishal Sikka’s unexpected dramatic exit.

The buyback price fixed Rs1,150 per share is at a steep 24.57% premium to the closing price of Rs923.10 on Friday. The stock had slipped 9.6% at closing, its sharpest fall since 12 April 2013.

The company, said in a statement, that the buyback price was at a 19.08% and 18.70% premium over the volume weighted average market price of the stock in the past three months preceding the date of intimation to the exchanges of the board meeting to consider proposal of buyback. The record date for the buyback will be announced at a later date.

Earlier, Edelweiss Securities Ltd had said, in a 17 August note, that Infosys buybacks are not a reflection of maturing growth or lack of confidence in business, instead it is a more efficient method of distributing cash as it has posted relatively better numbers than peers in past few quarters.

Also read: The backstory to Infosys CEO Vishal Sikka’s resignation

“For Infosys, the buyback will lead to higher return on equity (RoE) and pay out ratio. We do not perceive this move to be an outcome of lower growth, instead it well means limited possibilities of large acquisitions going ahead, and consistent generation of cash,” the brokerage firm said.

In April-June period, dollar revenue of India’s second-largest software services company grew 3.1% on a sequential basis and 2.7% in constant currency terms. It had raised its dollar revenue outlook to 7.1-9.1% for 2017-18 from its earlier forecast of 6.1-8.1%.

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