Wipro mega deal update!

Wipro has signed a $700-million deal with Metro AG. With the intention to extend up to 4 additional years, it can be a potential spend of up to $1 billion, according to Wipro.

What does the deal win mean for Wipro?

• This deal win will help the company to improve its revenue growth in the coming years. 
• Wipro’s consistently weak execution in the earlier part of the year was reflected in the Apr-Jun period with USD revenue growth of -4.8% YoY.
• 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. 
• Following the deal win, global brokerage firm Macquarie has maintained an ‘Outperform’ rating on the stock with a target price of ₹416. Macquarie believes that the deal win is an important step in improving the company’s revenue growth rate in Europe. 
• Kotak Institutional Equities has predicted a revenue growth of 7.7% (in constant currency terms) in FY22, as the deal win provides better earnings visibility. Kotak has a target price of ₹380 on the stock. (above the CMP)
• The deal is expected to close by April-21.

Update on share buyback

• Wipro has fixed December 11th as the record date for its ₹9,500 cr buyback programme. Accordingly, in case you held Wipro shares on that date, you will be eligible to participate in the buyback. The share buyback is set to open on Dec 29th and will close on Jan 11th, 2021. 
• According to Goldman Sachs, upcoming share buyback (at ₹400 per share via tender route) has led to expensive valuations, as compared to the stock’s historic average. Post the buyback, the stock will start pricing in weak fundamentals and continued market share loss versus its peers.  Given this outlook, we recommend that you tender your shares in the upcoming buyback. (read our previous report)