Everything you need to know about Infosys buyback

On 10th October, 2022, Infosys announced that the company’s Board of Directors shall consider a proposal for buyback of equity shares of the Company on 13th October, 2022. You can check the announcement here.

Update: On 13th October,2022, Infosys announced that its Board of Directors have approved buyback of equity shares aggregating up to Rs. 9,300 crores through the open market buyback route for not more than Rs. 1850 per share. You can check the announcement here.


Latest Update: The open market buyback of Infosys will open on December 07, 2022, and will close on June 06, 2023 (that is 6 months from the date of the opening of the Buyback) or when the company completes the buyback by deploying the amount equivalent to the maximum buyback size (Rs. 9,300 crores). You can check the announcement here.


What is an open market offer?

There are two types of buybacks: tender offer and open market offer. Companies can choose either of these methods to buyback shares from their shareholders.

Open-market offer: The company can buy back its shares by actively buying from sellers on the exchange. The buyback period is mentioned in the buyback offer, and it can last for months to ensure that there is no significant price movement due to the buying activity.

Tender offer: The company makes an offer to buy back its shares at a particular price (offer price) at which the shareholders can tender, i.e., sell their shares.

How do I offer shares in open market buyback?

Giving shares directly to the company is not possible in open market buyback. Unlike tender offer, where you can offer shares directly to the company. In an open market buyback, the company actively buys the shares on stock exchanges.

At what price does the company buy back the shares in the open market?

In open market buyback, the company buys back the shares at prevailing market price. However, the company can only buy back shares at the maximum price it has set. In case of Infosys, the company can buy back the shares at only Rs. 1850 or lower, above that, the company cannot buy the shares.

How does the taxation work for open market buyback?

The company buying back the shares in a tender offer or open-market offer pays all taxes on the buyback offer. Buyback transactions are shown separately in the Console tax P&L, and there won’t be any additional tax liability in such a case.

You can keep track of all the latest Buybacks, Takeovers, Delistings on Bulletin

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I feel this buyback could be similar to the last buy back i.e open market buy back for Infosys. We will come to know by today evening after the meeting.

Not an expert, but I feel the best option for buyback is open market buy back as the company gets time to execute the buy back and can buy back the shares when the stock falls instead of tender buy back where a premium is normally given to the market price. I feel in Tender Buy Back, lot of first time investors will get in and get out just to make use of the premium that is paid under the buy back. Heard a lot of user in this forum asking similar question when TCS had announced the buy back.

Anyways, I am sure experts at Infosys will know which option is best for their shareholders.

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Not necessarily.

Sometimes, managements take decisions that benefits themselves and not their shareholders. Even a big company may take a decision that is not welcomed by the market.

I am not talking about Infosys, but saying it in general.

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This will be continues third buyback by INFOYS which is from OPEN MARKET …year 2019 , year 2021 and year 2022 … it was TENDER STYLE in year 2017 .

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Can we invest in Infosys at current stock price considering this info???

It is an OPEN MARKET BUYBACK not direct from shareholders . company will buy from nse/bse through a broker like you and me buy subject to price max 1850 per share …company would buy at much lower than 1850 looking at present market price.

Since the buyback is from the open market, will the favourable (to the shareholder) taxation on buybacks apply? I did a bit of searching about this, but couldn’t find information about this.

My main confusion is: since the buyback is from the open market, how does a shareholder establish that it is indeed the company which bought the shares from them, and not some other entity? Without this aspect, will the provisions of Section 115QA apply?

This is @Quicko 's article on the matter. As far as I can see, they don’t tell anything about whether the provisions apply on open market buybacks.

Perhaps @Jason_Castelino can throw some light on this? Thank you.

When buyback happens through tender offer there is no taxation involved. It is waived

When it happens through the open market offer the shareholders will not get any immediate benefit. There will a fixed period by when infosys will have to buy back the shares and exitinguish them. The benefit is for long term shareholders, when a fixed quantity of shares gets extinguished from the market the market price will gradually increase.

The advantage being there is a fixed period and company can space out the buyback as and when market price falls.

With regard to your confusion how does it really matter when u selling the stock who the buyer is
Whenna buyback is operational, the buyer could be the company or any other purchaser.

In a open market the company is not forced to offer a fixed price. They can buy at the market price. This is a great advantage for long term shareholders.

With regard to tcs, my guess is tata sons wanted money for the air india acquisition. Hence i think they went for tender route of 4600 ( dont remember exactly). If they had opted for open market they could have bought the shares when tcs tanked to below 3000. This would have been benefial for long term shareholders. In any case buyback does not involve tax as well. So tata sons got a lot of money tax free
This is only my guess work and not fact.

You will not get any benefit in investing in infosys based only on this news. The buy back benefit in an open market mode is over long time and good for existing long term shareholders. So you can invest in the company based on their other metrics and not based on this.

If the buy back was tender. Yes there was a possibility of you buying low and selling it back to company withon a short period of time. Again this is subject to their acceptance ratio.
When tcs had announced. Many jumped into this opportunity. Not sure if they made money or not

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Thanks

No. He won’t get the benefit of this. So it’s as good as he has sold to any other person.

But if I see from other than taxation POV I feel open market offer is much better than tender offer.
The company will buy back at a lower price and the benefit of the same will be ultimately enjoyed by all the shareholders.
If it’s tender offer investor who hold more than 2L value will have lower acceptance ratio. I do not feel that’s fair.
Again it’s my personal view.

Well, someone liked the buyback news very well. Volumes picking up today.