Wipro gains 3% as board to consider share buyback on April 27

Shares of Wipro moved higher by nearly 3 per cent to Rs 377.75 on the BSE in Monday’s intra-day trade after the company informed the stock exchanges that its board of directors will meet on Thursday, April 27 to consider a proposal of share buyback. The company last conducted a buyback of Rs 9,500 crore in FY21 via tender offer. Buyback is a corporate action in which a company buys-back its shares from the existing shareholders usually at a price higher than market price. When it buys back, the number of shares outstanding in the market reduces. The reasons for buy-back is to improve earnings per share, to improve return on capital, return on net worth and to enhance the long-term shareholder value; to provide an additional exit route to shareholders when shares are under-valued or are thinly traded and to support share price during periods of sluggish market conditions. There are two types of buyback: tender offer and open market offer. Shareholders may be presented with a tender offer whereby they have the option to submit (or tender) a portion or all of their shares within a certain time frame and at a premium to the current market price. This premium compensates investors for tendering their shares rather than holding on to them. The company can buy back its shares by actively buying from sellers on the exchange. The buyback period is mentioned in the buyback offer, and it can last for months to ensure that there is no significant price movement due to the buying activity. Meanwhile, despite of today’s outperformance, in past one year, Wipro has underperformed the market by falling 29 per cent. In comparison, the S&P BSE Sensex has gained nearly 6 per cent during the same period. The stock had hit a 52-week low of Rs 351.85 on April 17, 2023. Meanwhile, January-March quarter (Q4FY23) is seasonally weak for Wipro due to fewer working days and some furlough impact in January. In IT services, the company is witnessing incremental pressure due to weak macros among some pockets such as US retail, technology companies, investment banking, etc, which are likely to impact Q4 revenues, according to analysts at ICICI Securities. The brokerage firm said it take in 0.5 per cent QoQ decline in revenues in CC for the quarter while we build in 100 bps cross currency tailwinds for the quarter resulting in +0.5 per cent QoQ increase in dollar revenues for the quarter. Rupee revenues are expected to increase 0.5 per cent QoQ for the company. “We expect Wipro to report 30 bps QoQ EBIT margin decline in IT services despite some tailwinds available in terms of moderation of attrition etc on account of weak revenues, lower utilisation, some incremental expenses in terms of facility, etc. The company is also witnessing delay in decision making leading to delay in deal closures as some cautious stance being taken by clients,” analysts said in result preview.