Infosys, India's second-largest IT services provider, has recently announced a ₹18,000 crore (approximately $2 billion) share buyback program, its largest ever. This move, approved by the company's board on September 11, 2025, involves repurchasing nearly 10 crore equity shares at ₹1,800 per share. This price reflects a 19% premium over the closing price of ₹1,509.50 on the Bombay Stock Exchange (BSE) on September 11.

Details of the Buyback

The buyback will be executed through a tender offer route. This differs from Infosys's last three buybacks, which were conducted through open market transactions. The buyback covers 2.41% of Infosys's outstanding equity. As of June 30, 2025, Infosys had a free cash flow of around ₹7,805 crore ($884 million). The company will seek shareholder approval through a special resolution via postal ballot and remote e-voting, alongside other necessary statutory approvals. The company has also obtained exemptive relief from the U.S. Securities and Exchange Commission (SEC) for its buyback.

Strategic Rationale

The buyback aligns with Infosys's capital allocation policy of returning 85% of free cash flow to shareholders between fiscal years 2025 and 2029. In fiscal year 2025, the company returned approximately 52% of its free cash flow through dividends. Share buybacks can signal to the market that a company's management believes its stock is undervalued. They also provide investors with an opportunity to receive immediate cash, while those who retain their shares may benefit from improved earnings per share (EPS) due to the reduced share count.

Infosys's management views the buyback as a reflection of the company's strengths translating into sustained growth as technology spending revives and AI adoption creates new opportunities. The company holds over ₹40,000 crore in cash and liquid investments and generates more than ₹30,000 crore in annual free cash flow.

Market Impact and Analyst Views

The announcement created mixed signals in the market. While Infosys shares listed in the U.S. showed a slight increase, shares in India initially dipped. However, the stock has seen some positive movement since the announcement. Analysts view this move as a strategic vote of confidence, with the potential for EPS growth and attractive dividend yields. Nomura analysts estimate that Infosys will return greater than 100% of its fiscal year 2026 free cash flow to shareholders through the buyback and expected dividends. They maintain a "Buy" rating on the stock with a target price of ₹1,880.

Some experts suggest a "buy on dips" strategy, anticipating that the buyback could trigger a rally in the stock, supported by a strong balance sheet. However, some investors have expressed concern that the funds used for the buyback might have been better deployed toward research and development, expansion, or acquisitions.

Tax Implications

Gains from the buyback are taxed as "Income from Other Sources". Effective October 1, 2024, the entire compensation received by shareholders is treated as a deemed dividend under Section 2(22)(f) of the Income Tax Act. While shareholders must report the entire buyback compensation under "Income from Other Sources," they can declare a notional capital loss equal to the buyback amount.

Historical Context

This marks Infosys's fifth buyback since 2017. The company's previous buybacks include: * 2017: ₹13,000 crore via tender offer, purchasing 11.30 crore shares at ₹1,150 per share. * 2019: ₹8,260 crore via open market, repurchasing 11.05 crore shares at ₹747.38 per share. * 2021: ₹9,200 crore via open market, with shares bought back at an average price of ₹1,648.53. * 2022: ₹9,300 crore via open market at ₹1,850 per share.

Since 2017, Infosys has repurchased and extinguished 11.62 crore fully paid-up equity shares.

Conclusion

Infosys's ₹18,000 crore share buyback program is a strategic move to enhance shareholder value and demonstrates the company's confidence in its financial position and future prospects. The buyback offers investors an opportunity to realize immediate gains, while potentially boosting the company's EPS. The move aligns with Infosys's broader capital allocation strategy and commitment to returning value to its shareholders.