Infosys’s share buyback: A playbook for Indian IT firms to catch up with AI?

Core Viewpoint - Infosys Ltd's ₹18,000-crore share repurchase plan is seen as a strategy to boost investor confidence amid a challenging market, while raising concerns about the company's commitment to investing in future technologies like AI [1][10]. Group 1: Share Buyback and Financial Performance - Infosys has returned ₹1,51,987 crore ($17 billion) to shareholders through dividends and share buybacks since April 2017, while spending ₹8,925.62 crore ($1.01 billion) on R&D and approximately ₹11,500 crore ($1.3 billion) on 20 acquisitions [4]. - The company's share price has decreased by 25% since January 2023, indicating a potential undervaluation that the buyback aims to address [7]. - Infosys's operating margin has declined from 24.7% in March 2017 to 21.1% in March 2023, reflecting pressures on profitability [11]. Group 2: Investment in Technology and Market Position - The company has made modest investments in AI and disruptive technologies, raising questions about its long-term competitiveness compared to global rivals like Accenture and IBM, which have disclosed significant GenAI-related deals [10][15]. - Since the launch of ChatGPT on November 30, 2022, Infosys's share price has fallen by 7.91%, highlighting the impact of generative AI on market dynamics [12]. - Analysts predict that AI may lead to a 20% revenue deflation in IT services from 2025 to 2030, with growth in the IT services market limited to a CAGR of 1.5%-3% over 2024-2029 due to various factors [13][14]. Group 3: Acquisitions and Strategic Focus - Infosys's acquisitions include firms in cybersecurity, data analytics, and digital services, but only nine out of twenty acquisitions were focused on high-tech areas [5][6]. - The company has acquired several firms in the digital space, including Australian and American companies, as part of its strategy to enhance its service offerings [6]. - Despite the buyback signaling a commitment to shareholder value, it also indicates a lack of immediate high-return investment opportunities through R&D or M&A [9].