Wipro fixes record date for buyback

Wipro has fixed December 11th as the record date for its ₹9,500 cr buyback programme. Accordingly, in case you continue to hold the shares till that date, you will be eligible to participate in the buyback.

• Wipro’s board had already approved its proposal to buyback up to 23,75,00,000 equity shares of the company at ₹400 per share. This is at a premium of about 15% to the current market price of ₹347.

Outlook on Wipro’s business

Last month, global brokerages had raised concerns about Wipro’s business growth, after the company declared its Q2 results.

Wipro shares have fallen by over 9% in the last two days to ₹341.50, after global brokerages have raised concerns that the company’s growth may continue to lag peers.

• Goldman Sachs noted that Wipro shares are trading at a 12-year high valuation (PE ratio of 12.60)  partly driven by expectations of the share buyback, even though there is no material change in the near-term growth outlook. The brokerage believes that Wipro continues to have the weakest growth profile among its peers.
• There are concerns that the company will continue to lose market share to larger peers such as TCS and Infosys.
• Jefferies noted that while Wipro’s second-quarter result was ahead of expectations and guidance for 1.5-3.5% sequential growth in the third quarter surprised positively, but valuations remain expensive given a lower growth profile.

INDmoney Analysis

Wipro has seen four chief executives in the last decade and has lagged its peers in growth. It lost its third position to HCL Technologies in the previous fiscal year. The New CEO Theirry Delaporte took charge from July 6th. 

In Q2FY21, Wipro has reported better-than-anticipated numbers. Wipro has seen a great quarter with growth in revenues, expansion of margins and robust cash generation. However, given their market leader position and stronger execution capabilities, peers TCS and Infosys may continue to gain market share going forward. Given this outlook, we recommend that you tender your shares in the upcoming buyback.