Infosys’ buyback vs Wipro’s build-out

Hello,

This week, SEBI approved sweeping reforms aimed at boosting capital markets and strengthening investor protection, including rule changes that make it easier for large global firms to list in India.

Meanwhile, Pine Labs secured SEBI’s nod for its long-awaited IPO, which could raise up to $1 billion.

And finally, fintech unicorn Groww filed revised IPO papers for a ₹6,000-7,000 crore ($723m-$843m) issue, as its lofty $8 billion valuation didn’t wash with the public markets.

I hope you enjoy this week’s roundup — please connect on LinkedIn to discuss your next M&A deal.

Let’s dive in.

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Market Trends

Buyback v build-out: Are India’s big tech players taking sides?

Infosys moved fast. Within weeks of softening guidance and chatter about slowing IT spend, not to mention Trump’s looming HIRE Act, the company announced a share buyback worth $2.2 billion (a 19% premium) — its first since 2022. 

The decision may have reassured investors that even if growth is threatened, cashflows remain strong (and shareholders will be rewarded). 

Infosys’ rival, Wipro, facing the same pressures chose a different route — to buy Harman’s Digital Transformation Solutions unit for $375 million, bringing in 5,600 employees and global clients in engineering R&D (ER&D). 

So while Infosys is handing back cash, Wipro is making an acquisition to expand capabilities. 

So what?

McKinsey’s research has long stressed that buybacks are not inherently bad: ‘Share repurchases don’t fundamentally create value, but they don’t destroy it either,’ the experts say. What matters is whether companies use buybacks when they have excess capital after funding all profitable growth opportunities. 

Infosys may stand to answer. With ample reserves, low debt, and limited near-term avenues for growth, returning capital may seem attractive as markets tend to reward companies with capital discipline (return programmes).

Buybacks don’t undermine investment, especially in cash-rich, capital-light sectors like IT.

Yet, there are risks. McKinsey warned that aggressive repurchasing can jeopardise future growth if companies misjudge the need for reinvestment. In sectors such as IT, where tech cycles turn fast, caution may be worth taking. 

The case for acquisitions

Wipro’s Harman DTS deal is a bet that ER&D services will grow faster than traditional outsourcing and folding DTS into its existing ER&D vertical brings ‘the agility and precision of a specialist provider’ and new clients. 

The flipside is that integrating 5,600 employees across 14 countries will be no picnic. Brokerages already flagged likely margin dilution in the near term. If synergies don’t materialise, Wipro could be left with higher costs and no uplift in competitiveness.

Too big to fail

India’s IT sector contributes between 7% and 10% to GDP and is navigating slowing global tech spending, US tariff uncertainty, and rising wage costs. 

Against this backdrop, capital allocation choices will be under much nervous scrutiny. Do firms reassure shareholders with cash back, or do they double down on growth bets?

The buyback trend isn’t limited to Infosys. Tata Consultancy Services (TCS) has been a consistent user of buybacks to support share prices. Market watchers speculate that other majors Wipro, HCLTech could face investor pressure to follow suit.

There is no one right answer

The divergence between Infosys and Wipro shows buybacks are neither inherently good nor bad; acquisitions can be value-creating or value-destroying.

Infosys’ move might signal a peace offering to jittery shareholders. Wipro’s play is to reposition itself higher in the value chain, and work towards future relevance. 

Investors can’t judge them by their choices but their outcomes.