Infosys shares zoom to five-month high on buyback call
Posted on Aug 07 2014 | IANS
Bangalore, Aug 6 : Shares of India's second largest IT company Infosys Ltd. soared to a five-month high at Rs.3,604 Wednesday on the Bombay Stock Exchange (BSE) following a demand by its two former honchos that the company should buy back its shares worth Rs.11,200 crore (about USD 2 billion).
The blue chip company's share of Rs.5 on par touched a high of Rs.3,604.50 in afternoon trade on the BSE after opening at a low of Rs.3.520.30. It closed at Rs.3,574.70, gaining Rs.70.45 or two percent over Tuesday's closing rate of Rs.3,504.25.
Similarly, on the National Stock Exchange (NSE), the Infy scrip quoted at a high of Rs.3,608.35 after opening at Rs.3,525 and closed at Rs.3,575.85 as against Tuesday's closing rate of Rs.3,513 per share.
About 636,000 shares were traded on both the bourses Wednesday.
The last time the company's scrip touched Rs.3.608 was March 12 on NSE.
The sudden interest in the company's shares from institutional and retail investors came after its former board members T.V. Mohandas Pai and V. Balakrishnan jointly wrote July 29 to its board recommending buyback to restore confidence in its pricey stock.
Pai and Balakrishnan were chief financial officers of Infosys in succession for over a decade.
The heightened activity in the company's shares has come within days of former SAP executive Vishal Sikka taking over as the global software major's first non-founder chief executive August 1.
In the joint letter, also signed by the company's former vice-president D.N. Prahlad, the trio advised the board to immediately consider buying back its shares equivalent to the value of Rs.11,200 crore at the 52-week high price of Rs.3,850 per share.
"While the change (of guard) was inevitable, the abrupt nature of the change raises some serious concerns not only in our minds, but also with many stakeholders," the letter said. The company has never bought back its shares since it was listed in the early 1990s in India and overseas on the Nasdaq in 1999.
Though Pai and Balakrishnan declined to comment on the development, market analysts said the company's scrip had been surging since Monday and outperformed the market by seven percent till date this week.
"Sikka wants to build on the core values of Infosys to strengthen its position in the IT sector. His focus areas are to deliver on high operating margins, maintain its leadership in the sector and strengthen client relationships. We believe that the new CEO has allayed concerns on the change in management to affect its growth," brokerage firm Angel Broking said in a statement.
Pai, who quit Infosys in April 2011 after 17 years of association, is chairman of Manipal Global Education.
Balakrishnan, who resigned from the company December 31, 2013, joined the Aam Aadmi Party (AAP) and contested in the recent Lok Sabha elections from the Bangalore Central constituency though he lost to the sitting BJP lawmaker P.C. Mohan.