After Sikka's exit, Infosys stock makes it to LIC 'buy list'

Turmoil-hit Infosys is on the “buy list” of Life Insurance Corporation of India (LIC) for this month, according to a senior official at the country’s largest insurance company.

“We have a process-driven investment approach. Infosys has made it to our ‘buy list’ for this month. We will continue to buy shares of the company,” the official said. He said LIC bought “a few thousand shares” on Friday, when the stock dropped as much as 13% due to the uncertainty created by the resignation of Vishal Sikka from the post of managing director and chief executive officer.

On Friday, the stock ended at Rs 923, down 9.6% over previous close of Rs 1,021. It had hit an intra-day low of Rs 884.2 and more than Rs 7,600 crore worth of shares had changed hands at the NSE counter and another Rs 750 crore at the BSE.

A day later, the Infosys board approved a Rs 13,000-crore share buyback at Rs 1,150 per share. This was at 24.6% premium to Infosys’ last closing price.

The LIC official said the buyback price is “attractive” and they “would soon take a decision” on how much shares the company would want to tender in the repurchase programme. The buyback timeline will be announced after the resolution is put for shareholder voting.

LIC is the largest institutional shareholder in Infosys with a 7% stake, followed by OppenheimerFunds, which has 2.16% stake and Singapore government’s GIC, with 2.11% stake, as per the June quarter shareholding data provided by the BSE. HDFC Mutual Fund and ICICI Prudential Mutual Fund, the country’s largest fund houses, hold 2% and 1.5%, respectively.

Most investors Business Standard spoke to said that they were closely monitoring the developments. Being a large stock in the benchmark Sensex and the Nifty indices, the stock is owned by a large number of institutional shareholders and exchange traded funds.

“We are yet to hear from the Infosys management. In the interest of all the shareholders, we want the issue to be resolved at the earliest. We are not happy with the way things have been handled at Infosys. However, it is too early to decide if we would switch our investment to other technology companies,” the LIC official said.

 

Shares of rival Tata Consultancy Services (TCS) had gained 1.32% on Friday as some investors switched from Infosys, according to some market players.

“After the latest correction, the stock has become attractive on valuation front. We might consider buying shares from the open market and tendering some in the buyback. Given the uncertain phase the IT industry is going through, we cannot expect a big bounce in the shares. The buyback is a good opportunity to cash out some of our existing holdings,” said a fund manager.

The acceptance ratio for non-retail shareholder is likely to be tiny as the buyback amounts for only 4.96% of the paid up equity share capital of the company. Retail shareholders (those holding less than Rs 2 lakh worth of shares) can expect a better acceptance ratio as they would have reservations for 15% of the buyback amount.