Wipro's Rs 9,500 cr buyback opens today. Should you tender your shares?

IT services major Wipro's share buyback programme will commence on December 29 and close on January 11, 2021. In November, shareholders had approved the buyback plan for purchase of up to 23.75 crore equity shares at Rs 400 per share, aggregating to an amount of up to Rs 9,500 crore. The company has set December 11, 2020 as the record date for determining eligibility for the buyback.

So, should you tender your shares in the repurchase programme?

Siddharth Khemka, head of retail research at Motilal Oswal Financial Services, said that since the IT stocks, including Wipro, have done well over the past few months, investors looking for a payout can tender their shares.

"The stock has already moved up in the last couple of months on the back of strong growth expectations from the IT sector. The quarterly results have been pretty good even during the lockdown phase. These companies reported sharp improvement in margins leading to high profit growth so the stock price has reacted positively. Now, if an investor is looking at cash payout, they can participate in the buyback. From a long-term point of view though, the stock is expected to do well," Khemka said.

Thus far in calendar year 2020 (CY20), Wipro has gained 54.2 per cent as compared to 13.72 per cent gain in the benchmark S&P BSE Sensex. Among other IT stocks, Infosys and HCL Tech have surged 67.77 per cent and 60.83 per cent in the same period. TCS has also gained 34 per cent.

According to Deepak Jasani, head of retail research at HDFC Securities, investors should opt for the buyback despite the thin spread between the offer price and the current price. Wipro hit an intra-day high of Rs 386.30 on Monday.

"The current price is not very far from the offer price, but I think  50-60 per cent of the offer share may be accepted. It may be a good idea to offer the shares and then buy it back whenever the stock falls," he said.

Acceptance ratio is the number of shares accepted in a buyback offer as compared to the total number of shares tendered. As per Sebi norms, 15 per cent of the total buyback size is reserved for small investors with holdings up to Rs 2 lakh in the company.

Meanwhile, Wipro recently inked a $700-million deal to provide IT services to German food wholesaler Metro AG for five years.

The deal -- which is originally for five years -- can be extended by another four years, and that will enhance the minimum revenue commitment to $1 billion. Wipro has been aggressive in winning large deals since the management change, say analysts. READ ABOUT IT HERE

On the other hand, Gaurang Shah, head investment strategist at Geojit Financial Services also suggests make use of the offer and tender their shares. A lot, he says, will depend on the acceptance ratio.

"All those who have bought Wipro only from the buyback point of view can tender the shares, and do whatever is necessary. But all depends on how many shares get tendered. "Historically, Wipro has been an underperformer at the bourses. When you compare large-cap like Infosys, HCL Tech and TCS, Wipro has underperformed at the bourses. There are better stocks in the IT universe than Wipro. But if one has the stock it in their portfolio, hold it for now and sell on rally," Shah advises.