Infosys will consider a proposal to buy back shares and issue a special dividend in its board meeting on January 11, the company said in a statement to the exchanges on Tuesday. The IT behemoth is also slated to announce its third quarter results on the same day.

According to the capital allocation policy of the company, in addition to normal dividend that is pegged at 70 percent of free cash flow, the Infosys board announced an additional capital return of $2 billion in FY2019. Of this, the company has repaid $400 million through a one-time dividend of Rs 10 a share in June 2018. The remaining $1.6 billion is expected to be returned either in the form of a buyback or special dividend or a combination of both.

The brokerage house Antique estimates that the share buyback of $1.6 billion will result in a buyback of 3.3 percent of equity assuming a price of Rs 780 (15 percent premium to the current market price).

If the entire amount of $1.6 billion is used for dividend, it implies a handout at Rs 22 a share (after dividend distribution tax). As buyback is a tax efficient way of returning cash to shareholders, the company is expected to use a higher proportion for the exercise. This is, however, widely expected by the street since the one-year moratorium for the share buyback also ended in December 2018.

In terms of quarterly numbers, the constant currency growth (exchange rates that eliminate the effects of fluctuations when calculating financial performance numbers) seen at 1.5 percent quarter-on-quarter will fall well short of last quarter’s 4.2 percent Q-o-Q growth because this is a seasonally weak period due to year-end furloughs. But the momentum due to securing of strong deals will ensure that the company’s growth is higher than the December quarter growth of 0.8 percent.

The third quarter earnings from Infosys will also be important since there is a possibility that the company could raise the lower end of its full-year guidance from 6-8 percent in constant currency to 7-8 percent even as it continues to hold on to its FY19 EBIT margin guidance at 22 -24 percent.

First Published:Jan 9, 2019 3:31 PM IST