PremiumMUMBAI : India's second largest IT firm Infosys Ltd on Sunday said that its board will meet on 14 April to consider buyback of shares. The company will also consider its March quarter earnings and final dividend.
Analysts say share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting the stock price during sluggish market conditions.
As of March 2020, Infosys has cash and cash equivalent at Rs18,649 crore.
In September 2019 and December 2017, Infosys had completed Rs8,260 crore and Rs13,000 crore buyback.
In July 2019, the company altered its capital allocation policy to give back 85% of its free cash flow to shareholders through a combination of semi-annual dividends, buyback and/or special dividends effective from FY20. Earlier, the company was distributing up to 70% of its free cash flow to the shareholders.
India’s three IT majors—TCS, Infosys Ltd and Wipro Ltd— together have more than $14 billion in cash. In addition, they generate about $8 billion cash every year, suggesting that they have enough cash to reward their shareholders.
On earnings front, analysts expect Infosys to deliver a top quartile growth backed by strong deal wins ($12 billion in nine month ended fiscal year 2021, up 63% year on year).
According to 15 Bloomberg analyst estimates, the firm is expected to post a revenue of Rs26,397.90 crore while net profit will be at Rs5,168.30 crore.
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Premium Premium On margins, digital revenue is now more than 50% of total sales and expanding by double digits which could more than offset pricing pressure on legacy IT work. Analysts forecast Infosys organic revenues to grow at 18% in FY22 versus 13% for TCS and 11% for HCLT.
"We expect Infosys revenues to grow at 18% in cc terms in FY22, which is 300-400bps above consensus. In addition, we believe margins for Infosys for FY23e will only decline by 50bps versus 100-200bps decline estimated by consensus. Investment phase is largely behind Infosys which impacted the margins in the past few years, and we expect uptick in margins because of lower investments, higher digital proportion which should offset expected increase in travel and facilities related cost," said Antique Stock Broking in a note to its investors
"We increased our earnings estimate by 7% for FY23 as we increased our revenue and margins assumptions on improved outlook and rupee depreciation; while increasing valuation multiple to 32x (from 28x) earlier which is at 25% premium to our average target multiple for IT large caps led by better near and long-term growth", the Antique note added.
The brokerage firm has maintained buy rating on the stock and increased its target price to Rs2,020 a share from Rs1,650 a share.
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