Wipro hits 52-week high; buyback attractively priced, say analysts

Shares of Wipro, country's third largest software services firm, hit a 52-week high of Rs 291 on Friday, up over 8% after the IT major announced a share buyback of Rs 11,000 crore entailing 34.3 crore equity shares at Rs 320 apiece.


   
The buyback price is 24% higher than the average price of the stock for the past six months, which analysts believe is attractive and investors can consider tendering their shares.
 

“The proposed buyback has been done at an attractive price. It will see the stock rally in the immediate term. I think investors can tender their shares,” said Sarabjit Kour Nangra, VP Research- IT at Angel Broking.

 
Brokerage HDFC Securities also suggests investors tender their shares. Going ahead, the brokerage feels organic growth for the company will remain a challenge and investors will be better off utilising the current opportunity to exit the stock .
 
“Organic growth engine for Wipro remains a challenge. Some pockets have shown improvement in the last couple of quarters. Digital revenue is growing strongly, but these are not enough to backfill the loss from legacy.  We currently have a neutral rating on the stock, and we recommend shareholders to tender shares,” point out Amit Chandra and Apurva Prasad of HDFC Securities in a result analysis note.

 
Meanwhile, Wipro has gained over 13% year-to-date, the most among four largest IT services firms. TCS and HCL Tech rose 3% and 7%, respectively, while Infosys declined 4% during the same period. By comparison, the Nifty IT and the Nifty50 indices have gained 0.9% and 21%, respectively during this period.
 
Wipro is the fourth Indian IT services firm to announce a buyback after TCS, Infosys and HCL Technologies. While the largest Indian IT firm TCS announced a buyback of shares worth Rs 16,000 crore at Rs 2,850 each, Infosys said it would spend as much as $2 billion in either share buyback or dividends to shareholders this financial year. CLICK HERE FOR THE FULL REPORT

 
The Bengaluru-based firm on Thursday reported a 1.2% rise in its consolidated net profit at Rs 2,076.7 crore for the April-June quarter against Rs 2,052 crore posted in the year-ago period.
 
Wipro, which gets bulk of its topline from IT services, said it expects revenues from that business to be in the range of $1,962-2,001 million in the September quarter. For the June quarter, IT services revenue came in at $1,971.7 million, up 2.1% from the year-ago period.
 
Brokerage Edelweiss Securities maintained ‘buy/sector performer’ rating on the stock with a revised target price of Rs 290 (14 times its FY19E EPS) as it revised the dollar rate to Rs 66, from Rs 67 earlier, and adjusted the share count to reflect the proposed buyback.

 
"We delivered revenues above the upper-end of the guidance range. Our focus on digital, combined with our investments in client mining, has resulted in strong growth in top accounts," Wipro CEO Abidali Z Neemuchwala said.