The drama and melodrama at Infosys just doesn’t want to end. Very clearly the founder and first CEO of the company NRN is hell bent on self-destruction. Ever since the first non-promoter CEO was appointed in Vishal Sikka there has been back seat driving from the founder promoter. Every issue has been highlighted using the media and creating a demoralising effect on the team. Since the last few years the board is a professional one and has no representation of the founders. This has made matters worse and damaging to the interest of the company and therefore its shareholders. Naturally as a result of the same what was once considered the darling of the markets is no longer so. The share trades at a substantial discount to the valuation of TCS while at one time it set the benchmark for valuations.
Coming to the drama and melodrama part of the episode. Thursday the share price of Infosys rose from Rs 977 to Rs 1021 a gain of Rs 44 on the back of the board deciding to meet to announce a buyback of shares. The next day the resignation announcement of Sikka saw the share plummet and close at Rs 923, a loss of Rs 98 for the day and a net loss of Rs 65 or 6.58% for the week. Finally the announcement of the buyback would be at a huge premium to the market price of Rs 923 at Rs 1,150 a premium of Rs 227 or or just under 25%. It would cost the company Rs 13,000 crs and deplete the cash in the books of the company by that amount. Infosys generates close to Rs 10,000 crs every year. Logically the buyback price could trigger a short term knee jerk price rise when markets open on Monday but nothing in the longer term as just about 5% shares would be accepted. The key would be to look at the futures volume and increase in open interest.
Coming to the markets, it was an eventful week with four trading days. The market did show some recovery after the sharp fall in the previous week but it did not have the strength or the confidence of being a change in sentiment. Global tension continues to haunt the market place and some acts of terrorism had their effect on markets as well. The BSESENSEX gained 311.09 points or 1.00% to close at 31,524.68 points while NIFTY gained 126.60 points or 1.30% to close at 9,837.40 points.
There is an IPO which opens on Tuesday the 22nd of August and closes on Thursday the 24th august from Apex Frozen Foods Limited. The company is in the business of being an integrated producer and exporter of shelf stable quality aquaculture products. The issue price band is Rs 171-175. The PE ratio for the issue considering an EPS of Rs 10.17 is between 14.21 to 14.40 times. The company would through a fresh issue and an offer for sale raise Rs 152 crs. The issue looks interesting from the viewpoint that it is attractively priced and offers scope for appreciation.
Markets are looking tired and need to consolidate before moving forward. Trade cautiously.
