Wipro gains 4% after announcing schedule for Rs 10,500-crore share buyback

The company said it will dispatch the Letter of Offer for the buyback to eligible shareholders appearing on the record date of June 21, 2019, on or before August 6, 2019.

Wipro shares climbed 4 per cent to Rs 276 in early morning trade on the BSE on Thursday in an otherwise weak market after the company said it'll begin its Rs 10,500-crore share buyback programme on August 14 and close on August 28.

Wipro received final comments from the market regulator Securities and Exchange Board of India (SEBI) on July 30, with respect to the draft Letter of Offer filed by the Company for the share buyback.

It will dispatch the Letter of Offer for the buyback to eligible shareholders appearing on the record date of June 21, 2019, on or before August 6, the company said.

The IT firm's board had, on April 16, approved buyback of up to 323 million equity shares for consideration of up to Rs 10,500 crore at Rs 325 per share through a tender offer. Members of the promoter and promoter group have also indicated their intention to participate in the proposed buyback.

Wipro is the first company to go for a share buyback after the government proposed in the Budget a 20 per cent tax on the money spent on buying shares from shareholders.

In the past two weeks, post the June quarter (Q1FY20) earnings, Wipro has outperformed the market by gaining 2 per cent, despite revenue guidance of 0.0-2.0 per cent for September quarter (Q2FY20). In comparison, the S&P BSE Sensex slipped 4 per cent during the same period.

Most of the brokerage houses downgraded the stock citing no signs of turnaround visibility, tepid Q2 growth guidance and muted commentary across verticals.

"We cut our revenue and earnings estimates for Wipro over FY20-21E to reflect weaker growth, stronger INR in FY20E and impact of weaker growth on margins. We also factor the impact of buy-back. Our price target, based on 13x FY21E EPS declines to Rs 225 (previous Rs 245). We maintain Underperform as we Wipro to continue underperforming industry growth and believe it is over-valued at 16/15x FY20/21E P/E," wrote Arya Sen of Jefferies in a post results note.

“We expect USD revenue growth of 3.0/5.4 per cent and IT services EBIT per cent at 18.1/18.3 per cent for FY20/21E. Wipro trades at 14.7x FY21E EPS (in-line with Tier-1 median), which is rich considering its growth profile. Our SELL stance is driven by the weakness in core growth metrics and execution challenges. Risk to our thesis includes improved US/Europe macro and INR depreciation,” analysts at HDFC Securities said in result review dated July 18, 2019.

At 10:29 am, Wipro was trading 3 per cent higher at Rs 274 on the BSE, as compared to 0.80 per cent decline in the S&P BSE Sensex. The counter has seen huge volume with a combined 8 million shares changing hands on the BSE and NSE so far.