Infosys Share Buyback: IT company Infosys has said that its board of directors will initiate the process of repurchase fully paid-up share capital in its meeting on April 14, 2021. This is the third time Infosys is doing its share buyback. Earlier, Infosys had repurchased 11.05 crore shares valued at Rs 8,260 crore in August 2019. The first share repurchase of the company was valued at Rs 13,000 crore in December 2017. In this, the company had repurchased 11.3 crore shares at the rate of Rs 1,150 per equity. In the midst of this process of Infosys share buyback, what share buyback means for investors, there is confusion about how to plan ahead. They should take advantage of this buyback, sell the shares or retain their investment in them. Let’s know.
What is a share buyback
A share buyback is a process in which a company buys back its own shares from the market. In this way the company reinvents itself. The number of outstanding shares in the market decreases after the company’s shares are repurchased. Now as the number of shares decreases, the ownership of each shareholder increases somewhat on a comparative basis. Share buybacks can also be understood in simple terms as a reversal of an IPO.
Why does any company buy its own shares?
Whenever there is talk of share buyback, a question arises in the mind that why the company is buying its own shares. Whenever the company feels that it has more capital and has no project to invest in the company invests itself by buying shares. Anyway, it is not considered good for any company to have more cash, this also affects the balance sheet. In such a situation, that cash can be put to good use by share buyback. Even if the company feels that the value of its stock is being underestimated, then the company does a share buyback, which increases the value of the share. This also instils confidence in the investors that the financial condition of the company is very good, which also increases the prices of the company’s shares.
The important question is what should investors do?
The biggest question in the buyback process of Infosys is what should the investors of Infosys do now. The answer to this question is different for long-term and short-term investors. If you have invested in Infosys for a long period, do not sell your shares in the process of buyback, keep investing in them, they will give you more returns in the coming days. You should sell the shares under share buyback only if you find that the value of the company’s stock is very high (overvalued) and the company has no significant growth opportunities. On the other hand, if you have invested in Infosys for a short period or if your motive is limited to earning profits only by trading, then it is not less than a golden chance for you.