Earnings impact, valuation concerns for Capco deal to weigh on Wipro stock

Intent to scale up BFSI portfolio is positive but analysts see integration and execution risks

Shares of Wipro declined more than 4 per cent on Friday as concerns over execution and valuation regarding its deal to acquire Capco left investors unenthused.

According to the company, the deal is EPS-dilutive in the first year. Analysts peg the EPS (earnings per share) hit to be in the range of 4 to 9 per cent in FY22 with Wipro’s operating profit margins seen contracting by as much as 200 basis points during the same period. However, the company expects margins to improve as it realises the revenue and cost synergies from the acquisition and estimates EPS to turn accretive