Wipro Share Buyback 2023: Should you buy, sell or hold?
Wipro, one of India’s leading IT companies, has announced a share buyback plan worth Rs 12,000 crore at a price of Rs 445 per share. This is the biggest ever buyback by the company and it comes at a time when its revenue guidance for Q1 FY24 has disappointed the market. The buyback price is 19% higher than the closing price of Rs 374.35 on April 27, 2023.
The company said that it will buy back 26.96 crore shares, which is about 4.91% of its total equity shares, from the shareholders on a proportionate basis through a tender offer. The promoters of Wipro have indicated their intention to participate in the buyback, which is subject to the approval of shareholders and regulators.
The share buyback plan is seen as a positive move by some analysts, who believe that it will boost shareholder value and return excess cash to investors. They also expect that the buyback will support the stock price in the short term and provide a floor for any downside risk.
However, some analysts are also skeptical about the buyback plan, as they think that it may hide the weak outlook for FY24. They point out that Wipro’s revenue guidance of -1% to +1% sequential growth for Q1 FY24 is lower than its peers and indicates a soft demand environment. They also worry that the buyback may reduce the cash available for future investments and acquisitions.
Therefore, investors may have to weigh the pros and cons of the buyback plan before deciding whether to buy, sell or hold Wipro shares. The stock has gained about 25% in the past year, outperforming the Nifty IT index, which has risen by 18%. However, it still trades at a discount to its peers on valuation parameters such as price-to-earnings and price-to-book ratios.
Wipro is undergoing a transformation under its new CEO Thierry Delaporte, who has taken several initiatives to improve growth, profitability and client satisfaction. The company has also won several large deals in recent quarters and expanded its presence in new markets and domains. The impact of these measures may take some time to reflect in the financial performance of Wipro.
Hence, investors may have to be patient and watchful of how Wipro executes its strategy and delivers on its expectations in FY24 and beyond. The share buyback plan may be a short-term catalyst for the stock, but it may not be enough to sustain its long-term growth prospects.
The Company’s Background
An Indian multinational organisation called Wipro offers clients in 167 different countries consultancy, business process, and information technology services. It began off as a manufacturer of vegetable oils in 1945 before expanding into the IT and computer sectors in the 1970s and 1980s. Wipro has offices abroad in New Jersey, USA, and Bengaluru, India, where its headquarters are located.
Wipro provides many different technology consulting services, such as cloud computing, cyber security, digital transformation, robots, artificial intelligence, and data analytics. The Wipro Enterprises division of the corporation specialises in consumer goods, lighting, furniture, hydraulics, water treatment, and medical diagnostics.
How to participate in buyback?
Wipro, one of the leading IT companies in India, has announced a share buyback plan worth Rs 12,000 crore. The company will buy back up to 26.96 crore shares at a price of Rs 445 per share, which is 19% higher than the current market price. The buyback offer is open to all the shareholders of the company as on the record date, which will be announced later.
A share buyback is a process by which a company repurchases its own shares from the market, usually to reward its shareholders or to improve its financial ratios. Shareholders who participate in the buyback offer can tender their shares to the company at the offer price and receive cash in return.
To participate in the buyback offer, shareholders need to follow these steps:
- Check if you are eligible for the buyback offer. You should be holding Wipro shares as on the record date, which will be notified by the company.
- Check how many shares you can tender in the buyback offer. The company will announce the acceptance ratio, which is the percentage of shares that will be accepted from each shareholder. For example, if the acceptance ratio is 50%, you can tender up to half of your shares in the buyback offer.
- Fill and submit the tender form, which will be sent by the company or its registrar to your registered address or email. You can also download it from the company’s website or from your broker’s portal.
- Transfer your shares to the designated account of the company or its registrar before the closing date of the buyback offer. You can do this through physical or electronic mode, depending on how you hold your shares.
- Wait for the payment of cash for your accepted shares. The company will credit your bank account or send you a cheque within 15 days of the closing date of the buyback offer.
By participating in the buyback offer, you can benefit from selling your shares at a premium and receiving cash. However, you should also consider the tax implications and opportunity cost of selling your shares. You should consult your financial advisor before making any decision.
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