Infosys founders hold more shares now than before

Everyone know that Infosys’ founding members and their family hold very little stake in the company compared to what Tata Sons holds in TCS or Azim Premji and his family hold in Wipro. But despite this, the number of shares currently held by them and the value of their holding is the highest ever. Maybe this is the reason why they are trying to sell some shares in the upcoming buyback too.

The increase in number of shares they hold is thanks to the expansion in the company’s share base in recent years due to two bonus issues. Due to the extra shares received in the bonus issues, Infosys’ promoters now hold 29.28 crore shares, up from the 9.5 crore shares they held in 2007.

The additional shares that promoters received in the bonus issues have also helped them rake in strong gains. While the annualised price return in Infosys was just 7 per cent in the last 10 years, the value of the holdings of promoters and their families is up by ₹22,629 crore — an increase of 20 per cent annually. The stake of Narayana Murthy and other co-founders of Infosys has, however, reduced over the years. It is currently down to 12.75 per cent from 16.54 per cent towards the end of March 2007. They have been paring their stake every few years, making money at each point of exit. In the share sale in December 2014 for instance, which was four months after Vishal Sikka joined the company, four of the founding members — Narayana Murthy, Nandan Nilekani, S D Shibulal and K Dinesh and their families together sold about 3.26 crore shares for an amount of ₹6,484 crore. The sale that took place at about ₹990-1,000 per share on adjusted basis, sent the stock tanking 5 per cent on the day. Promoter holding dropped to 13.07 per cent from 15.9 per cent after the sale. After this, some of the founders even approached SEBI to de-classify themselves as promoters.

The stock of Infosys has not been a show-stealer on the bourses with sedate 7 per cent annual returns over the last 10 years. The bonuses have, however, helped bump the returns of the promoters. There have been two bonus issues in the last 10 years – one in 2013-14 and other in 2015-16, and both were at a ratio of 1:1. Anyone who held say 100 shares in 2007 in Infosys, would now hold 400 shares. So, despite offloading shares in the market every few years, Infosys’ founders now hold more shares.

If we take stock of the years before the bonus issues, the increase in the value of their holdings in the company has not been much. Between 2006-07 and 2013-14, the value of promoter holdings moved up from ₹4,753 crore to ₹7,503 crore – an annual appreciation of 6.7 per cent in seven years.

The bonus bounty has helped institutional investors too who have been reposing faith in the Infosys stock even as promoters have been sliding towards the exit. Between 2006-07 and 2016-17, the domestic institutional holding in Infosys has gone up from 3.34 per cent to 20.13 per cent. Holding of Infosys stock by some of the popular mutual fund schemes such as HDFC Prudence, HDFC Equity, Birla SL Frontline Equity and ICICI Pru Value Discovery currently exceeds ₹700 crore. Given the two bonus issues, despite the not-so-good returns on the stock, total investments by institutions currently (as of June 30, 2017) stands at ₹42,866 crore.

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