HCL Technologies and Infosys (NS:INFY), two of India's leading technology firms, reported substantial earnings growth for the second quarter of the fiscal year 2024 (Q2FY24), which ended on September 30, 2023. HCL Technologies saw an 8.21% rise in net profit to Rs 2,966 crore and a 6.06% increase in total income to Rs 12,311 crore compared to the same period in FY23. On a consolidated basis, the company experienced a 9.92% surge in net profit to Rs 3,833 crore and an 8.49% rise in total income to Rs 27,037 crore compared to the corresponding quarter of FY23.
Meanwhile, Infosys reported a more modest Q2 net profit increase of 3.1%. However, these financial results were not isolated incidents but part of a broader trend of corporate financial growth and strategic decision-making in India's tech sector.
In 2023, over 40 companies initiated share buybacks totaling about Rs 47,500 crore. Major players include TCS, L&T, and Wipro (NYSE:WIT) with buybacks exceeding Rs 10,000 crore each. Infosys concluded its Rs 9,300 crore share buyback in February 2023. TCS led the buyback scheme with a share buyback of Rs 17,000 crore at Rs 4,150 a share.
Share buybacks are strategic decisions where companies repurchase their own outstanding shares through tender offers or open market operations to enhance the value of remaining shares and signal positive growth prospects. They can inflate a company's share price as they reduce the number of shares in the market, impacting supply-demand dynamics.
Deepak Jasani from HDFC Securities highlighted that compared to dividends, share buybacks are more tax-efficient for both companies and shareholders. Buyback gains are taxed at 23.296% at the company level, while shareholders are exempt under section 10 (34A) of the Income Tax Act.
In other financial news, HDFC AMC shares saw an intraday surge of over 5% on October 13, driven by strong Q2 results for the September-ended quarter. The company's year-on-year net profit jumped 20% to Rs 436 crore from Rs 364 crore in the corresponding period of the last fiscal while operational revenue grew by 18%. Over the past year, HDFC AMC shares have delivered a return of 50% to shareholders.
While these financial developments reflect a positive trend in the Indian tech sector, it's important to note that not all companies have enjoyed similar success. For instance, Bank of Baroda is facing regulatory action over unauthorized app registrations, and Paytm Payments Bank incurred an RBI fine of ₹5.39 crore for KYC violations.
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