Record Infosys buyback hailed as capital discipline, questioned as innovation trade-off

A logo at the headquarters of Infosys Ltd. in Bengaluru, India
| Photo Credit:
KAREN DIAS

Infosys’ record ₹18,000-crore equity share buyback has sparked mixed reactions among market experts, with some viewing it as a disciplined capital allocation move to boost shareholder value, while others argue the funds could have been better deployed toward acquisitions and investments in emerging technologies like AI and automation.

Harshal Dasani, Business Head, INVasset, explained that Infosys’ decision to initiate its largest-ever share buyback underscores a strategic move to optimize its capital structure and enhance shareholder value. He added that the buyback, priced at ₹1,800 per share — a 19% premium over the market price — demonstrates the company’s confidence in its financial health and long-term prospects.

The initiative also aligns with Infosys’ capital allocation policy of returning approximately 85% of its free cash flow to shareholders over five years (FY25–FY29).

“By reducing the number of outstanding shares, the buyback aims to improve earnings per share (EPS) and return on equity (ROE), thereby enhancing shareholder value. Furthermore, the move serves as a signal to the market about Infosys’ robust cash generation capabilities and its commitment to delivering value to its investors,” he said.

Anand K Rathi – Co-Founder of MIRA Money, explained that most IT companies generally choose buybacks when they do not see opportunities for the free cash flows they’ve generated.

Instead of keeping the money in cash and pulling down their EPS, most companies either buy back or return it as dividends. But since dividends are heavily taxable, and so is buyback these days, most IT companies are opting for the latter, he said.

Some analysts also noted that the free cash flow might have been deployed for mergers and acquisitions instead.

“A reason companies like Infosys are behind the curve and are subjected to a lot of IT outsourcing is that they spend more money on buybacks than on new age technologies or buying stakes in upcoming technologies like AI and LLMs. This is a negative thing because most of the management is now trying to only use the cash flows by giving it back than by using it for innovations and putting money back into products that can develop, that can be developed and be of better use later,” Rathi said.

Former Infosys CEO Vishal Sikka also indicated there was an opportunity for the company to acquire stakes in OpenAI, but it was ultimately. “This decision is a significant negative for companies, especially cash flow-generating firms in the Indian IT sector,” he said.

Navy Vijay Ramavat, MD, Indira Group, on the other hand, commented that Infosys demonstrated a balanced approach with the buyback.

He continued that while some argue that capital may have been directed to acquisitions or further investments in newer technologies like AI, cloud, and automation, Infosys has already invested heavily in this area. With over ₹42,000 crore in cash and strong annual free cash flows, the company will have adequate flexibility to make investments in expansion while also delivering returns to investors.

“The buyback does not restrict its potential to pursue strategic M&A or internal R&D. Given the challenging global demand environment and margin pressures across the IT sector, retaining higher cash could have provided additional resilience. However, the counterargument is that excess idle cash earns little return and depresses capital efficiency,” he said.

Buybacks can sometimes be interpreted as a sign that a company has limited high-return reinvestment opportunities, but in Infosys’s case, the buyback should be viewed as a tool to optimise capital structure and reward investors, not as a retreat from growth, Ramavat concluded.

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Published on September 12, 2025

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