Infosys has announced a buyback of ₹18,000 crore at ₹1,800 per share. For long-term investors, buybacks are a way of rewarding shareholders. But for short-term traders and arbitrage seekers, they can create a unique profit opportunity — known as buyback arbitrage.
In this article, we’ll explain how the strategy works, the role of acceptance ratio, how to hedge with put options, and provide real scenario examples with detailed profit and loss (P&L) calculations.
A share buyback means the company purchases its shares from existing investors at a fixed premium price. Infosys’ buyback price is set at ₹1,800, while the market price is lower (around ₹1,510 in our example).
Arbitrage is created by:
The outcome depends on the acceptance ratio — the percentage of shares that Infosys will actually accept in the buyback.
When Infosys closes at ₹1,400, the hedge (1480 put) pays out since CMP < strike.
| Acceptance | Accepted (A) | Remaining (R) | Buyback Gain | Equity P&L (400−A) | Put P&L | Net P&L | ROI |
| 5% | 20 | 380 | ₹5,800 | –₹41,800 | ₹18,000 | –₹18,000 | –2.98% |
| 10% | 40 | 360 | ₹11,600 | –₹39,600 | ₹18,000 | –₹10,000 | –1.66% |
| 15% | 60 | 340 | ₹17,400 | –₹37,400 | ₹18,000 | –₹2,000 | –0.33% |
👉 Insight: At ₹1,400, losses are limited thanks to the protective put. Even with low acceptance, the hedge caps the downside to ~1–3%.
When Infosys closes at ₹1,600, the put option expires worthless, so only the premium (₹14,000) is lost.
| Acceptance | Accepted (A) | Remaining (R) | Buyback Gain | Equity P&L (400−A) | Put P&L | Net P&L | ROI |
| 5% | 20 | 380 | ₹5,800 | +₹34,200 | –₹14,000 | ₹26,000 | +4.30% |
| 10% | 40 | 360 | ₹11,600 | +₹32,400 | –₹14,000 | ₹30,000 | +4.97% |
| 15% | 60 | 340 | ₹17,400 | +₹30,600 | –₹14,000 | ₹34,000 | +5.63% |
👉 Insight: At ₹1,600, returns are positive in every case. ROI ranges from 4.3% to 5.6% depending on acceptance ratio.
1. Acceptance Ratio Determines Profitability
2. Hedge Protects Downside
3. Short-Term Attractive Returns
4. Breakeven Levels are Lower
The Infosys buyback presents a hedged arbitrage opportunity for investors and traders. By buying shares, tendering them in the buyback, and hedging with a put option, participants can limit downside while targeting short-term returns.
For those comfortable with event-driven strategies, Infosys buyback arbitrage is a smart play combining safety with attractive returns.
At Jainam Broking, we believe in empowering investors with research-backed strategies that balance opportunity and risk. To explore how you can participate in such opportunities, connect with our advisory desk today.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Stock prices can be volatile; investors may lose capital.
https://www.jainam.in/wp-content/uploads/2024/11/Disclosure-and-Disclaimer_Research-Analyst.pdf
The instruments mentioned here are for informational purposes only and should not be considered recommendations. Please do your research and analysis thoroughly before making any investment decisions. Jainam Broking Limited does not guarantee assured returns or future performance of any securities or instruments.
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