The case deals with the Rs.130 billion buyback of shares announced by India-based IT company Infosys. This was the third largest share buyback in Indian corporate history. The company in November 2017 decided to buy back 4.92% of its paid-up equity capital at Rs.1150 per share. In the process, it was expected to return a third of its cash reserves to investors.

The primary objective of a share buyback is to provide investors the opportunity to have access to the idle cash lying with the company and to improve the market value of the share in the long run. However, in the case of Infosys, analysts were of the opinion that considering its long-term objectives of making several acquisitions, going in for such a high value of buyback was not a viable option as it would have an impact on the long-term investment objectives of the firm. Also, the relationship between the buyback process and the market value of the share in the long run was unclear, analysts observed. Amid such a volatile situation, the over subscription of shares for the buyback created a dilemma in terms of defining the long-run prospects of the company.

This case study can be helpful to study the business opportunities and growth, cash flow position, the stock position of Infosys and to analyse the factors that would have impact on the market value of the shares in the long run.

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Issues

The case is structured to achieve the following teaching objectives:

	To understand the features share buyback
	To examine the reasons and advantages of share buyback
	To analyze the impact of buybacks on earnings per share and market price of the share
	To analyze the impact of buybacks on cash flow position

Contents

INTRODUCTION

BACKGROUND

CASH FLOW POSITION

CAPITAL STRUCTURE AND SHAREHOLDING PATTERN

BUYBACK SCENARIO IN INDIA

CONCLUSION

EXHIBITS

Keywords

Infosys Limited,Buyback,Entitlement ratio,Acceptance ratio,Earnings per share,Market price,Tender process,Shareholding pattern,Cash flow position,Market Value of Share

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