Infosys has announced a share buyback program of ₹18,000 crore, its largest ever since listing, offering a premium of 19% over the current market price. The buyback involves repurchasing approximately 10 crore shares at ₹1,800 per share. This move aims to enhance shareholder value, improve financial metrics, and provide tax-efficient returns. The buyback is proposed through a tender offer route, subject to shareholder approval via postal ballot.

Record Date and Eligibility

The record date, which determines the shareholders eligible to participate in the buyback, is yet to be announced. To be eligible, investors must hold Infosys shares in their Demat account as of the record date. American Depositary Shares (ADS) holders can also participate by converting their holdings into equity shares before the record date.

How to Apply

Eligible shareholders can participate in the buyback by selling their shares through their stockbroker. The process involves notifying the broker of the number of shares they wish to tender and transferring the shares to the clearing corporation's special account. The broker then places a buyback order on the stock exchange. Investors using Upstox or Zerodha can apply through their respective platforms by logging in, selecting Infosys, and entering the quantity of shares they wish to tender.

Tax Implications

Gains from the buyback are taxed as "Income from Other Sources". Recent changes under the Finance (No. 2) Act, 2024, treat the entire compensation received by the shareholder as a deemed dividend under Section 2(22)(f) of the Income Tax Act. While the company deducts tax at source (TDS) at 10% for resident shareholders, the actual tax liability depends on the individual's income tax slab. Investors can declare a notional capital loss equal to the buyback amount in Schedule CG, which can be set off against other capital gains.

Benefits for Shareholders

The buyback offers several potential benefits for shareholders: * Premium Price: The buyback price of ₹1,800 per share is at a premium to the current market price, offering short-term gains. * Long-Term Value Creation: Reducing the number of outstanding shares can increase earnings per share (EPS) and potentially lead to higher stock valuations. * Retail Quota Advantage: SEBI mandates a reservation for small investors (holding shares worth up to ₹2 lakh), potentially increasing their chances of participation.

Market Impact and Analyst Views

Analysts view the buyback as a positive move that can support the stock price, especially given the current pressure on IT sector valuations and muted earnings growth. The buyback announcement has already given Infosys' stock some buoyancy. Some analysts recommend accumulating shares on dips, with potential short-term upside targets of ₹1,700-₹1,800.

Important Considerations for Investors

• Check the Record Date: Only shareholders as of the record date are eligible to participate in the buyback.
• Evaluate Tax Implications: Consult a tax advisor to understand the tax implications of the buyback gains.
• Stay Informed: Track official updates from Infosys on the NSE, BSE, and SEBI websites.

This buyback is the fifth such exercise by Infosys, surpassing previous buybacks in 2017, 2019, 2021 and 2023. The company's decision to undertake this buyback signals management's confidence in its long-term cash flows and growth prospects, despite a cautious revenue outlook for the current fiscal year.