Wipro trades up 2% on plans to review share buyback proposal

Wipro’s stock price gained 2 percent on Monday after the company said that it will review a proposal for buyback of equity shares this week.

“The board of directors of the company will be considering a proposal to buyback equity shares of the company and the matters necessary and incidental thereto, at its meeting scheduled to be held over April 26-27, 2023,” Wipro said in a regulatory filing on Sunday. The company is also expected to release its Q4FY23 earnings on April 27.

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The last buyback carried out by Wipro was during December 2020 to January 2021, amounting to Rs 9,500 crore. During this period, Wipro tendered 96.38 percent of the total buyback size, aggregating to Rs 9,156 crore. Prior to this, the company launched a buyback programme of Rs 10,500 crore in August 2019.

A buyback is expected to generally enhance the return on equity by distributing cash and reducing the equity base, eventually resulting in an increase in long-term value for shareholders. Moreover, the buyback would offer shareholders an opportunity to increase their stake in the company by improving the percentage of their holding and hence improvement earnings per share in the long-term.

Foreign brokerage JP Morgan has suggested that Wipro may choose to go through the tender offer route for its upcoming buyback, just like it did in its previous three buybacks in FY21/20/18 as this route allows promoters to participate.

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It also expects Wipro to most likely opt for a buyback in the range of $1.2-1.5 billion, considering the net cash on the balance sheet. However, if the buyback is more than $1 billion, it will be over 10 percent of paid-up capital and free reserves, it said, adding that a buyback would require shareholder approval. The brokerage has an ‘underweight’ rating on the stock at a target price (TP) of Rs 360.

At 11.18am, the scrip was trading 1.62 percent up in the NSE at Rs 374.00 with sectoral benchmark Nifty IT trading 0.20 percent higher at 26,876.70 points.

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