The Real Story Behind the Infosys Buyback Blitz

Infosys's $2 Billion Buyback: What It Reveals About India's Tech Giant and the Industry

Bengaluru – Infosys Ltd., India's second-largest software exporter, is leaning heavily into one of corporate finance's bluntest instruments: the share buyback. The company last week approved a ₹18,000 crore ($2.04 billion) repurchase programme – its largest yet – showing off both its financial heft and the uncertainty faced by the wider information-technology group.

The buyback, which will take place via a tender offer at ₹1,800 per share, is a 19% premium to Infosys's trading price before the announcement, and will retire 10 crore shares, or around 2.41% of its equity base.

At face value, it's a simple exercise in capital return. However, in the current environment of slackening global tech spending, increasing competition, and changing regulation, the move represents a more nuanced commentary on how Infosys is thinking about growth, capital allocation, and investor confidence.

What Sparked the Buy-Back

1. Excess Cash, few alternatives

Infosys has produced more strong free cash flow than it knows what to do with—$884 million (₹7,805 crore) in the June 2025 quarter alone. For a company with little debt and few near-term potential large-scale acquisitions, it has developed a culture centred on returning cash. For a long time, management has guided to returning 85% of cumulative free cash flow through dividends and buybacks.

2. A Signal of Confidence.

By paying a double-digit premium, Infosys is saying that it believes the market is undervaluing its stock. The IT industry, especially in the past year, has been pressured—clients have limited budgets, sales pipelines are uneven, and valuation levels have compressed. A buyback is the corporate equivalent of saying: “We’re better than the market realises”.

3. Boosting EPS and ROE math.

Shrinking the share count affects per-share financial metrics. If net income is flat, earnings per share (EPS) grow. At the same time, with less equity capital, return on equity (ROE) improves. Investors have seen this dynamic before, but most sceptics view it as financial engineering rather than real growth.

Same Playbook - BIGGER SCALE

This is not Infosys's first XL buyback.. Since 2017, Infosys has executed five buybacks:

2017: ₹13,000 crore (Infosys's first "serious" buyback)

2019: ₹8,260 crore

2021: ₹9,200 crore

2022: ₹9,300 crore

2025: ₹18,000 crore (largest ever)

Each time, the rationale for the buyback is essentially the same: plenty of cash, moderate growth opportunities, and a desire to reward investors. Where the 2025 buyback truly differs is in the sheer magnitude: at ₹18,000 crore, it nearly doubles the value of any previous buyback program. It therefore suggests that Infosys has far greater confidence in future cash flows and far fewer immediate uses for that cash.

What Shareholders Should Consider?

1. Tendering versus Holding

As the buyback proceeds via the tender offer route, shareholders must themselves tender shares for repurchase. Therefore, when you tender your shares, it does not guarantee that all your tendered shares will be accepted for repurchase - that will depend on the number of participants. Small shareholders (of up to ₹2 lakh worth of shares) are usually more likely to receive acceptance guarantees.

2. Tax implications

In India, buyback proceeds are taxed as capital gains tax in the hands of investors, whereas dividends are taxed differently in the hands of recipients. Therefore, for some investors, the after-tax return may be less than the advertised 19% premium.

3. Long-Term Growth Trade-Offs

Cash returned to investors is cash that will not be reinvested in R&D, acquisitions, or geographic expansion. For a business that competes against global heavyweights such as Accenture and IBM, that is not an insignificant point to consider. The critics would imply that Infosys is prioritising financial cosmetics over greater gambles.

Industry Context: Tech Slowdown and Capital Discipline

The share buyback comes as India's IT services industry faces its first prolonged slowdown in over a decade. The slowdown is partly due to inflation, and uncertainty is causing its clients in the U.S. and Europe to delay projects, which represent the majority of their revenue. Already, Infosys has reduced its revenue growth guidance for FY2025.

In that climate, handing cash back to shareholders instead of parking it on the balance sheet can be read as prudent. However, it is also a reflection that there are not many large-scale, high-growth opportunities. Unlike the 2000s, when Infosys rapidly invested in new verticals and countries, in today's environment, capital discipline is perceived as more rewarding than aggressive risk-taking.

Global Context: Following the U.S. Playbook -Partially

Infosys is not alone in utilising buybacks as a strategic lever. Globally, companies like Apple and Microsoft spend tens of billions of dollars each year on buybacks. Apple has been primarily at the forefront of the “buyback machine,” spending over $100 billion in cash in 2023 already to lower its share count and artificially raise EPS.

However, there is a key distinction in that U.S. tech companies are likely still spending tens of billions of dollars annually on innovation while buying back stock. By stark contrast, Infosys is left with questions about whether its stock buybacks are meant to excite confidence or if they are stuck with no idea for reinvestment.

Risks Investors Can't Overlook

Timing Risk: If macroeconomic conditions worsen, Infosys may end up overpaying for its stock.

Opportunity Cost: Large stock buybacks may restrict options for acquisitions or riskier investments in emerging technologies such as AI, cybersecurity, or cloud platforms.

Regulatory Scrutiny: India’s new buyback rules (effective 2024) impose stricter disclosures. Frequent large buybacks may draw regulatory attention.

Sectoral Challenges: If global IT demand continues to shrink, increased EPS from stock buybacks may not compensate for weaker fundamentals.

The Big Takeaway

This buyback acts as a reward to shareholders and as a narrative for Infosys. It tells the market: "We have lots of cash, we are disciplined with our capital, and we are confident in the future."

For investors, the question is more complicated. Does the buyback convey true undervaluation and strength, or does it signal that India's legendary IT company simply has fewer avenues for growth than in the past?

Regardless, the ₹18,000 crore buyback marks a shift. Infosys - once the poster child of the rapid rise of Indian IT - is now behaving like a global blue chip - conservative, shareholder-friendly, and cautious in a world that lacks confidence.

Authored By Deepika Bhattad