Infosys Buyback Arbitrage: A Smart Strategy for Investors and Traders

Written by Kiran Jani

Last Updated on: February 2, 2026

Introduction

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 infosys 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.

What is Infosys Buyback Arbitrage?

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:

1. Buying Infosys shares in the market (CMP ₹1,510).
   
2. Tendering them in the buyback (₹1,800).
   
3. Hedging with a put option (1480 PE @ ₹35) to protect against price declines.

The outcome depends on the acceptance ratio — the percentage of shares that Infosys will actually accept in the buyback.

The Setup

• Investment: 400 shares @ ₹1,510 → Total = ₹6,04,000
  
• Buyback price: ₹1,800
  
• Spread per accepted share: ₹290
  
• Put hedge: 1480 strike Nov PE @ ₹35 (400 contracts) → Total premium = ₹14,000
  
• Scenarios: Acceptance ratios of 5%, 10%, 15%
  
• Exit CMPs tested: ₹1,400 and ₹1,600

Example A: Infosys CMP = ₹1,400

When Infosys closes at ₹1,400, the hedge (1480 put) pays out since CMP < strike.

• Put payoff per share = (1480 – 1400) = ₹80
  
• Net PE P&L = (80 – 35) × 400 = ₹18,000

👉 Insight: At ₹1,400, losses are limited thanks to the protective put. Even with low acceptance, the hedge caps the downside to ~1–3%.

Example B: Infosys CMP = ₹1,600

When Infosys closes at ₹1,600, the put option expires worthless, so only the premium (₹14,000) is lost.

• Put payoff per share = 0
  
• Net PE P&L = –₹14,000

👉 Insight: At ₹1,600, returns are positive in every case. ROI ranges from 4.3% to 5.6% depending on acceptance ratio.

Infosys Buyback Arbitrage Key Learnings

1. Acceptance Ratio Determines Profitability

• At 5% acceptance, gains are limited and hedge cost may push ROI negative if CMP falls.
• At 10–15% acceptance, ROI improves to ~3–6%.

2. Hedge Protects Downside

• At CMP ₹1,400, losses would have been far higher without the put. With it, maximum loss is capped at ~3%.

3. Short-Term Attractive Returns

• ROI of 4–6% over a short span is competitive compared to fixed deposits or liquid funds.

4. Breakeven Levels are Lower

• The protective put lowers effective breakeven to around ₹1,495.

Infosys Buyback Risks and Considerations

• Acceptance Ratio Uncertainty: Final ratio may differ significantly.
  
• Option Costs: If put premiums rise, net ROI shrinks.
  
• Taxation: Under new rules, buyback proceeds are taxed as deemed dividend income under the head income from other sources in the hands of the shareholder. The company undertaking the buyback is required to deduct Tax Deducted at Source (TDS) from this amount before payment to the shareholder. 
  
• Execution Costs: Brokerage, STT, and financing must be included in final ROI.

Conclusion

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.

• At CMP ₹1,400, downside is capped at ~3% even with low acceptance.
  
• At CMP ₹1,600, ROI improves to 4–6% depending on acceptance ratio.

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.