Should Infosys Go Ahead With Share Buyback?

T V Mohandas Pai and V Balakrishnan, former board members of Infosys, and D N Prahlad, former senior vice-president of the company, in a letter to the company’s board dated July 29, 2014, demanded an immediate buyback of company shares to the tune of US$1.83 billion., They suggested that the buyback be at the 52-week high share price of Rs.3850 per share. They also recommended to make the announcement of an ongoing buyback program to the extent of 40% of the previous year’s net profit on a consistent basis. These former top executives said that the buyback would boost investors’ confidence in the company, improve share performance, and lead to effective use of cash. They claimed to have investors’ support for the buyback demand. “By writing the letter, we are providing the voice to thousands of other shareholders of the company, both institutional and retail, who overwhelmingly support a large cash return to shareholders of the company,” they said in the letter...