Infy Seeks Share­hold­ers’ Nod for Change in Ar­ti­cles

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Ben­galuru: In­fosys is ask­ing share­hold­ers to ap­prove an amend­ment to its ar­ti­cles of as­so­ci­a­tion al­low­ing it to re­pur­chase shares, a change that would help the IT com­pany mimic the moves of its larger ri­vals.

The com­pany will also ask share­hold­ers to ap­prove in­de­pen­dent di­rec­tor DN Prahlad’s ap­point­ment to the board and the re­vi­sion to chief op­er­at­ing of­fi­cer UB Pravin Rao’s com­pen­sa­tion, it said in a fil­ing to the Bom­bay Stock Ex­change.

In­fosys’ cur­rent ar­ti­cles of as­so­ci­a­tion do not ex­plic­itly men­tion share re­pur­chases. The amend­ment would set the stage for a buy­back, al­low­ing the board to con­sider such a pro­posal. The re­sults of the share­holder vote would be an­nounced in April, the com­pany said.

In­fosys’ founders, who own close to 13% of the com­pany’s shares, would not ob­ject to such a move, a source with knowl­edge of the mat­ter told ET. The com­pany is un­der sig­nif­i­cant pres­sure to ini­ti­ate a buy­back af­ter larger ri­vals Cog­nizant and Tata Con­sul­tancy Ser­vices an­nounced multi-bil­lion-dol­lar buy­backs.

Ear­lier this month, Cog­nizant said it would re­turn $3.4 bil­lion to share­hold­ers in the form of buy­backs and div­i­dend re­pur­chases. TCS an­nounced a .₹ 16,000-crore buy­back this week. EThad ear­lier re­ported that fol­low­ing ac­tivist hedge fund El­liott’s let­ter to Cog­nizant in Novem­ber, in­vestors had be­gun to ask In­dian IT companies to boost their buy­back as well to com­pen­sate share­hold­ers as in­dus­try growth slows. In­fosys has said it looks at its cap­i­tal al­lo­ca­tion plan pe­ri­od­i­cally and has been in­creas­ing its div­i­dend pay­out. But in­vestors have been ask­ing for more.

“Higher taxes on div­i­dends and eas­ier process for a share buy­back (eg: can now be done over ex­change) have in­creased the at­trac­tive­ness of share buy­back over div­i­dends. We had pointed out that Cog­nizant’s an­nounce­ments would likely re­sult in its peers be­com­ing more dis­ci­plined about their cash pay-out,” Sagar Ras­togi, an­a­lyst with Am­bit Cap­i­tal, had told ET. He pointed out that In­fosys has one of the high­est cash hold­ings as a per­cent­age of mar­ket cap­i­tal­i­sa­tion among In­dian-listed companies.

At the end of De­cem­ber, In­fosys had $4.48 bil­lion in cash, cash equiv­a­lents and in­vest­ments. An­a­lysts say In­fosys’ buy­back would be lim­ited given the com­pany’s ag­gres­sive growth plans. “I don’t think In­fosys will be able to do a mega-buy­back un­less they re­duce their growth tar­gets. If you want to reach $20 bil­lion in rev­enue by 2020 and you have said that $1.5 bil­lion of that will come from ac­qui­si­tions, you have to hold cash on the bal­ance sheet,” a sec­ond an­a­lyst, who de­clined to be iden­ti­fied, told ET. In­fosys has al­ready been at the re­ceiv­ing end of calls ask­ing it to buy­back shares.

In 2014, the com­pany was asked to in­sti­tute a buy­back but did not go through with the re­quest.

At that time, two of the com­pany’s for­mer chief fi­nan­cial of­fi­cers, V Balakr­ish­nan and TV Mo­han­das Pai, and cur­rent In­fosys board mem­ber Prahlad wrote a let­ter to the com­pany’s board ask­ing them to be­gin a .₹ 11,000-crore buy­back.

Last week, Rao said the com­pany was look­ing at all op­tions and buy­backs could hap­pen at the ap­pro­pri­ate time. In­fosys also amended Ar­ti­cle 106 to spec­ify that the com­pany may ap­point15 di­rec­tors and any in­crease would re­quire a spe­cial res­o­lu­tion in line with the Companies Act of 2013.

The cur­rent ver­sion says the com­pany can ap­point a max­i­mum of 18 di­rec­tors. The In­fosys board cur­rently has10 di­rec­tors.

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