Wipro jumps 4% on ₹12,000-crore share buyback plan

Wipro stock price soared nearly 4% on Friday after the IT major announced buyback of shares worth ₹12,000 crore, which nullified the impact of weak fourth quarter earnings and soft guidance for June quarter. The software services firm will purchase up to 269,662,921 shares of face value ₹2 each from the shareholders, accounting for 4.91% of the total number of equity shares of the company. The floor price for the share buyback has been fixed at ₹445 apiece, a 19% premium over Thursday’s closing price on the BSE.

Snapping three session losing streak, the shares of Wipro opened at ₹382.35, up 2.1% against the previous closing price of ₹374.35 on the BSE. Extending opening gains, the IT stock gained as much as 3.6% to hit an intraday high of ₹388, with 3.6 lakh shares changing hands over the counter on the BSE against a two-week average volume of 2.05 lakh scrips. In comparison, the BSE Sensex was trading 90 points, or 0.15%, higher at 60,739 levels, while the BSE IT index was up 0.9% with sectoral leaders TCS, Infosys, Tech Mahindra, and others rising up to 1%.

With a market capitalisation of ₹2.12 lakh crore, the IT heavyweight trades 27% lower than its 52-week high and 10% higher than its 52-week low. The blue-chip stock touched its 52-week high of ₹530 on April 29, 2022, while the 52-week low of ₹351.85 on April 17, 2023. The counter has fallen 26% in the last one year, while it shed nearly 2% on a year-to-date (YTD) basis. In the last six months, the shares gained nearly 1%, while it climbed over 8% in a month.

The share buyback exhibits promoters' confidence in the company and is seen as a way to share excess cash with stockholders of the company. It previously carried out share buybacks in 2021 and 2019. The company purchased shares worth ₹9,500 crore from shareholders in January 2021, while ₹10,500 crore shares in August 2019.

The buyback, to be conducted under the tender offer route, is proposed to be made from the existing shareholders of the company (including persons who become shareholders by cancelling American Depository Receipts and receiving underlying equity shares) as on the record date on a proportionate basis. “Members of the promoter and promoter group of the company have indicated their intention to participate in the proposed buyback,” it said.

The buyback scheme is subject to approval of shareholders by way of a special resolution through a postal ballot.

Meanwhile, the country’s third-largest software services company reported a 0.4% year-on-year drop in its fourth-quarter net profit. On a sequential basis, profit rose 0.7% to ₹3,074 crore in Q4. The gross revenue rose 11.2% year-on-year to ₹23,190 crore for the January-March quarter. Revenue from IT services increased 3.7% to $2.8 billion in Q4 2022-23.

Unlike peers, Wipro’s large deal win momentum accelerated in Q4, clocking second consecutive quarter of $4.1 billion deal total contract value (TCV), up 29% YoY.  

ICICI Securities in its report said Wipro’s continues to sign strong bookings but revenue conversion is still awaited on account of delayed ramp ups of existing deals as well as delayed start for some of the new deal signing. It is also reflected in weak Q1 guidance, which projects revenue to drop 1% to 3% in Q1FY24. “It is also a reflection of possibly weak numbers from their consulting business (numbers not disclosed, but mid-teen revenue mix in our view) which are the first one to face issues in a weakening macro situation,” it said.

“Discretionary spending cuts, higher share of consulting revenues and longer transition time of recent large deals are impacting near-term revenues. But it does not take away the large order book WPRO is sitting on which bodes well for growth once demand turns. Wipro is doing better on margin management vs peers as well (flat QoQ and guidance of maintaining margin), albeit at a lower starting point,” JM Financial said in a report.