Infosys has officially announced its much-awaited share buyback plan, sparking curiosity and confusion among investors. While the headline figure of the buyback price at ₹1,800 per share (compared to the current market price hovering around ₹1,500) looks attractive, there are several important details, eligibility conditions, taxation changes, and risks that investors must carefully understand before participating.

In this article, we break down the entire concept of Infosys’ buyback in a simple Q&A format so that every retail investor can grasp the finer points and avoid costly mistakes.

Who is eligible for the Infosys buyback?

The most common question is whether the buyback is only for investors who have held Infosys shares for a long time. The answer is simple: all shareholders are eligible, whether you bought shares years ago or just recently.

What matters most is the record date. Infosys has announced the buyback, but the record date has not yet been finalized. Once the company completes the necessary approvals, it will declare a record date. Any investor holding shares in their demat account on or before the record date will be eligible for participation.

For example, if Infosys declares December 12 as the record date, then anyone holding shares before that date will qualify for the buyback.

What is the buyback price and potential gain?

Infosys has announced a buyback price of ₹1,800 per share. With the current market price around ₹1,500, the implied premium is roughly 19 percent or ₹300 per share.

Many investors quickly calculate potential gains by multiplying the premium with the number of shares they plan to tender. For instance, if someone buys 50 shares, they may expect ₹15,000 in profit. However, this calculation often proves misleading because of an important factor called the acceptance ratio.

What is the acceptance ratio in a buyback?

Acceptance ratio is one of the most critical elements of any buyback. Infosys has announced it will repurchase 10 crore shares. However, if investors collectively offer more shares than that limit, not all tendered shares will be accepted.

For example, if 30 crore shares are offered while the company only wants to buy back 10 crore shares, then only a portion of each investor’s tendered shares will be accepted based on the ratio. This means that if you tender 50 shares, perhaps only 20, 25, or 30 shares may actually be accepted. The rest will be returned to your demat account.

This is why blindly expecting guaranteed profit from all shares tendered can be misleading. The acceptance ratio will only become clear after the record date and once the total number of applications is known.

Is buyback participation compulsory?

No, buyback participation is completely voluntary. If you do not wish to tender your shares, they will remain in your demat account and you can continue to hold them. Companies send notifications and emails to all eligible shareholders, but there is no requirement to take action if you are not interested.

Retail investor benefits and the 15 percent quota

A key point is that buybacks usually reserve 15 percent of the issue for retail investors. For eligibility, retail investors are defined as those holding shares worth up to ₹2 lakh as per the market value on the record date.

This leads to an important caution. If your holding is under ₹2 lakh today but the share price rises above that limit on the record date, you will no longer qualify as a retail investor. For example, you may have purchased shares worth ₹1.9 lakh, but if the price rises and the value crosses ₹2 lakh by the record date, you will be considered a non-retail investor.

Therefore, it is not the purchase price but the market value on the record date that determines retail investor classification.

Why do companies like Infosys announce buybacks?

The main reason is to improve earnings per share (EPS). When a company buys back shares, those shares are extinguished. With fewer shares outstanding, the same profit is distributed among a smaller base, automatically increasing EPS.

For example, if Infosys earns ₹1,000 crore in profit and has 1,000 crore shares, each share earns ₹1. If the company buys back 500 crore shares, the remaining 500 crore shares now share the same ₹1,000 crore profit, raising EPS to ₹2. Higher EPS often supports a higher share price.

The new taxation rules after October 2024

One of the biggest changes in recent times is taxation on buybacks. Earlier, buybacks were highly attractive because the company itself paid the tax, and shareholders received the premium tax-free. This led to widespread enthusiasm whenever a buyback was announced.

However, since October 2024, the rules have changed. Now the tax burden falls on shareholders, not the company. Gains from buybacks are treated as dividend income and taxed according to the investor’s income tax slab rate.

This means:

• If you fall in the zero-tax slab, your gains may remain tax-free.

• If you fall in the 20 percent or 30 percent slab, you will have to pay tax accordingly on your buyback gains.

• Companies also deduct TDS before distributing proceeds, further reducing the cash received upfront.

This change has made buybacks less attractive than they used to be, which is why such announcements have become less common.

Risks involved in buyback participation

Investors should also understand the risks. External factors such as US tariff policies, especially under President Donald Trump’s administration, can have a direct impact on the IT sector. If a sudden policy shock or global event causes Infosys shares to crash, more investors may rush to participate in the buyback, drastically lowering the acceptance ratio.

For instance, if the stock falls from ₹1,500 to ₹1,200 due to negative news, many more investors would tender their shares, making the acceptance ratio very low. In such a scenario, your expectations of tendering all shares may not materialize.

Conclusion

Infosys’ buyback at ₹1,800 per share certainly looks lucrative at first glance, but investors must carefully evaluate all aspects before participating. Eligibility depends on the record date, acceptance ratio determines how many shares are actually bought back, taxation rules have changed making gains taxable as per slabs, and external risks such as market volatility or policy changes can alter the expected outcome.

Participation is voluntary, and while retail investors enjoy a 15 percent quota, classification depends on the market value of holdings on the record date. Buybacks still serve as a tool for companies to improve EPS and reward shareholders, but the changed taxation system has reduced their past charm.

As always, this discussion is for educational purposes only. Buying, selling, or holding decisions should be made after consulting with your financial advisor.