Infinite Computer’s share buyback after 16 months of IPO raises several questions

The company made a public issue in January last year. The stock price has lost 27% since the announcement of the buyback in April

Infinite Computer Solutions India, which made an initial public offering (IPO) in January 2010, is undertaking a buyback of shares amounting to Rs27 crore, raising serious questions in the minds of shareholders.

Since the announcement of the buyback on 12 April 2011, the Infinite Computer Solutions stock price has lost 27%. Companies are known to undertake a buyback usually when they have surplus cash and have no plans to spend it any other way.

The company gave an interim dividend of Rs2 and a special dividend of Rs1 in November 2010. So why has the company decided to buy back its shares within such a short time after the public issue? What's even stranger is that even the company's managing director and some other officials are said to be selling their shares in the market since the buyback announcement.

The Infinite Computer Solutions public issue in January last year was oversubscribed 43 times. The issue received bids for 41.81 crore shares against the 97.7 lakh shares on offer. The portion reserved for qualified institutional buyers (QIB) was subscribed 48.44 times. The non-institutions portion was subscribed 106.1 times and the retail portion 11.07 times.

Now, the company is buying back shares from the market, at a price which it has said will not exceed Rs230 per share. The maximum offer will be up to Rs27 crore.

In a public notice, the company has informed that it has already bought back 4.01 lakh shares, about 59,000 shares through deals on the Bombay Stock Exchange (BSE) and 3.42 lakh shares on the National Stock Exchange (NSE), up to 10th June. For this, the company has paid out Rs6.33 crore.

On the matter of dividends, the company said in its annual report, "After careful assessment of the funds required by the company for expansion, your directors have recommended that the earnings of the company are to be ploughed back and hence do not wish to recommend any dividend for the financial year ended 31 March 2010."

One retail investor who has shares of Infinite Computer Solutions said, "If that is the case, then why did the company come with a buyback offer?"

It has been just 16 months since the company came out with a public issue and it has already announced a buyback of shares. Does it mean that the company generated enough profit to buy back its shares? A closer look at the financials suggests otherwise.

The operating margin for the March 2011 quarter crashed to 13.92% from 25.82% in the December 2010 quarter. Net profit fell to Rs7.24 crore compared to Rs12.40 crore in the previous quarter.

Little wonder then, that since the buyback announcement the stock has reacted sharply. Even today, the stock lost over 4% to close at Rs134.10 on the Bombay Stock Exchange.

According to information available, in the past few days the company's managing director and CEO, Upinder Zutshi, has sold 1.6 lakh shares in the market. Other associates, like whole-time director, Navin Chandra, has sold 14,097 shares, and compliance officer, Sanjeev Gulati, has sold 10,000 shares. This is strange considering that the management wants to buy back its shares.

"The CEO is selling shares at low current market price. They want to buy back as the stock price is well below its intrinsic value," the retail investor said, requesting anonymity.

Moneylife sent a detailed e-mail query to the company, but there has been no reply yet.




5 years ago

This company -Infinite management is sick. The President in US Neeraj Tewari got arrested and convicted in sexual solicitation of minor case.

He still works there after all this


5 years ago

Rs 107 profit? where is it?
well, nobody gives a damn about consolidated profits. Having started with a dramatic statement of factual errors and ended ugly personal attack you are yourself spreading nonsense here


5 years ago

This article is full of factual errors. Even in the past I had commented on quite a few factual errors & unsubstantiated conclusions in moneylife articles. Factual errors here are:

1. It did pay dividend of Rs.3 per share in FY11. Its IPO was towards end of FY10. It would not have made any sense to repay back to shareholders via dividend in FY10. Dividend & buyback are same in substance. Both are ways to return funds to shareholders.

2. Profit & margin numbers quoted here are standalone, which are meaningless. You must look at consolidated numbers. Operating margin improved to 17.19% in Mar11 quarter from 16.67% in Dec10 quarter. Net profit increased to 30 crore in Mar11 quarter from 27 crore in Dec10 quarter.

3. Company made 107 crore profit in FY11. It already paid 15 crore dividend. If it completes buyback of 27 crore, that will be a payout of total 42 crore to shareholders. I think 107 crore is enough profit to payout 42crore. Comapny has retained 65crore of profit last year. Buyback can not be said to be out of IPO funds.

I hope Sucheta spends less time twitting and diverts some time to ensure atleast factual errors are not made, as this leads to incorrect conclusion.



In Reply to Manoj 5 years ago

1. The main point of the article is why do a IPO and then do a buyback in a hurry. You have no answer to that. I have information that in the buyback, the promoter will tender his shares
2. For your education, standalone profit is what investors watch and value. Otherwise, the shares of icici bank would have been much higher
3. This is a crooked company and that shows in the share price

I did not understand the personal attack on someone called Sucheta. Did she write the piece? But shows the level the company and its hired dogs will stoop


In Reply to Manoj 5 years ago

but why is ceo selling and it is making new lows??????


In Reply to rad 5 years ago

That is an angle that moneylife or anyone interested in company shud investigate. The article gave 2 reasons for fall - 1.buyback out of IPO funds and 2. low or falling profit or margin. I clarified both are not the reasons.


In Reply to Manoj 5 years ago

This is a terriffic piece. This is exactly how crooked promoters are taking gullible investors for a ride. Moneylife cannot "investigate". Its not police or regulatory authority. Sebi can, and it is sleeping to the good luck of promoters of Infinite.

Dell to focus on small & medium businesses in Rajasthan

Dell will offer technology solutions to the city industries like gems and jewellery, textiles and others

Dell will now enhance focus on small and medium businesses in Rajasthan and offer relevant holistic solutions, services and targets. A company official said that the company will offer technology solutions to the city industries like gems and jewellery, textiles and others.

"As a part of our small and medium businesses (SMB) outreach strategy to work closely and IT partner with emerging businesses, we will offer them affordable, scalable solutions that help manage their resources in the most effective way," Satyen Vyas, director-medium business, Dell India, said.

"Rajasthan is home to some traditional businesses and industries like gems and jewellery, textiles, chemicals, marble, etc, that need technology to grow and thrive and Dell as an IT partner is equipped to address customer pain points and resolve problems," he said.


New IIP will track growth of MSME

The existing Index of Industrial Production data covers only big industrial segments

The government is expected to come out soon with a separate index to track growth of the micro, small and medium enterprises (MSME), sharpening focus on the unorganised segment that contributes substantially to the country's economy.

India's Chief Statistician TCA Anant said the existing Index of Industrial Production (IIP) data covers only big industrial segments.

"A lot of industry units, which employ less than 10 workers, do not get covered under the current survey. But such industries are a major component of our manufacturing sector, with a big share in overall production and exports of the country....So MSME ministry is thinking about releasing a new index to capture such industries," he said.

Anant said a new methodology would be required to cover such a segment but declined to give a specific time-frame by when the new index for MSME would be out.

He said the new series of IIP, which has 2004-05 as the base year, has left MSME out of the index. Other 14 source agencies, which were part of the old series, have been included in the new one as well.

"As for the MSME segment, a separate index will be developed. The sector is very important. The time-frame and other details will be decided later," he said.

MSME sector is the second largest employers in the country after the agriculture sector. As many as 60 million people are employed in the sector, which contribute to 8% of India's gross domestic product, and 40% of exports.


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