Infosys will pay up to Rs 13,000 crore to shareholders during the current financial year through dividend and/or share buyback.
“The board has identified an amount of up to Rs 13,000 crore ($2 billion) to be paid out to shareholders during financial year 2018, in such a manner (including by way of dividend and/or share buyback), to be decided by the board, subject to applicable laws and requisite approvals, if any,” Infosys said in a statement.
The Bengaluru-based firm had recently adopted a new Articles of Association that included a provision for buyback.
“Our capital allocation policy is aimed at balancing the strategic and operational needs of the company as well as enhancing shareholder returns,” Infosys CFO MD Ranganath said.
Infosys, which has cash reserves of about $6 billion on its books, has been under pressure from investors to utilise the amount either through share buyback or generous dividend.
The pressure had grown further after Infosys industry peers Cognizant and Tata Consultancy Services announced their mega buyback offers worth $3.4 billion and Rs 16,000 crore, respectively, to return surplus cash to shareholders.
Smaller peer, HCL Technologies has also approved a buyback of up to 3.50 crore shares worth Rs 3,500 crore.
Infosys said its current policy is to pay a dividend of up to 50 per cent of post-tax profits of a financial year.
“Effective from financial year 2018, the company expects to payout up to 70 per cent of the free cash flow of the corresponding financial year in such a manner (including by way of dividend and/or share buyback) as may be decided by the board,” it added.
Share buybacks typically improve earnings per share and return surplus cash to shareholders while also supporting share price during period of sluggish market condition.
Two of Infosys former CFOs — T V Mohandas Pai and V Balakrishnan — had recently exhorted institutional investors to raise questions about the huge cash pile on the company’s books, saying investors have an obligation to protect their investment.