A mail from a share holder to the management of INFOSYS
Ranganath D. Mavinakere
Chief Financial Officer
Financial Controller and Head – Investor Relations
I am holding 100 shares of INFOSYS in the above demat account; so I am a shareholder of INFOSYS.
There are so many talks in the media, after the Rs.16000 Cr buyback announcement from TCS and there are so many circulating stories or reports of uncertain or doubtful truths, and speculations in the media that our company (INFOSYS LTD) is also going to announce a similar kind of buy back of around $2.50 Billion in value in April 2017.
When the book value is around Rs.300/- there is no meaning to buy back the shares at 4 to 5 times its value from the market. The very purpose of increasing the shareholders wealth will not be attained by doing this kind of buy back strategy. Being a pro-rata basis buy back, it will not benefit the genuine shareholders and will not increase their wealth.
As a stakeholder of our company, the following are my suggestions:
At present the face value of equity is Rs.5/- Out of it, please retain Re.1/- of the face value and return back the remain Rs.4/- to the stakeholders and along with it, pay a special dividend of around Rs.40 or 50; that means a total out go of Rs.44/- or Rs.54/- to the stakeholders.
By this way, the equity would reduce by 4/5 but the reserve would reduce by 1/5 only.
Then automatically, the book value would increase proportionally and the market will oblige the same in due course.
If you consider the above suggestions (being a minority shareholder, I can only suggest and can't do anything beyond that) at best case, the equity will be reduced to Rs.228 Cr from the present equity of Rs.1144 Cr and reserve will be reduced to 44000 Cr from the present reserve of 56000 Cr.
In Indian corporate history, this was already attempted successfully by COLGATE in 2008 itself; COLGATE took the same decision in 2008 when they returned back Rs.9 out of Rs.10 face value and retained the Re.1/- As a result of that action, (of course, not that alone but they performed well business-wise too) the shareholders wealth increased by 3 to 6 times (even now, it is around 3.5 times more, compared with the value 8 years ago, that means CAGR of more than 40% ).
I hope that the above things might have some value and am expecting a response from the company