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Indian IT: Buyback to improve sentiments & support stock price amid muted growth

ICICIdirect Research 12 Sep 2025 DISCLAIMER

Infosys’ Board has approved a ₹18,000 crore share buyback through the tender offer route at a price of ₹1,800 per share, which is about a 19% premium to its last closing price, out of its cash reserves of ₹24,455 crore. This complements its strong deal pipeline and resumption of fresher hiring plans for FY26, indicating confidence in business continuity despite muted near-term growth. The move is likely to support stocks price in near term, even as revenue growth this year remains muted (guidance of 1-3% revenue growth for FY26).
The buyback represents up to 2.41% of its paid-up equity share capital, or around 10 crore shares and will be Infosys’ fifth and also its largest-ever buyback, bigger than the earlier ones of ₹13,000 crore in 2017, ₹8,260 crore in 2019, ₹9,200 crore in 2021, and ₹9,300 crore in 2023. It is expected to improve shareholder returns, with FY27 EPS (ceteris paribus) likely to witness an incremental ~2% boost and ROE rising to about 28.5% vs our pre-buyback estimates of 27%.  
U.S. tech giants are delivering non-linear revenue growth driven by AI, while Indian IT players are still unable to decouple costs from revenue, leaving them reliant on traditional margin levers that may face limits ahead. With Infosys shares down ~24% YTD, part of a broader correction across the top five IT outsourcers, management’s decision aligns with a broader trend of using buybacks to support valuations and return surplus cash.
We believe peers such as TCS and Wipro may also engage in buybacks. TCS, with cash reserves of ₹8,342 crore, follows a stated policy of distributing 80–100% of free cash flow, while Wipro, with ₹12,197 crore in cash, has adopted a new policy to return 70% or more of net income cumulatively over three years.
This buyback could improve sentiments & support stock prices amid muted near term growth prospects.

 

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