Wipro record date on June 16: Should you tender shares?

The size of the buyback offer is 4.91 percent of the total equity shares which, according to analysts, is good enough to get a decent acceptance ratio in the retail category

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Wipro shares are in focus as June 16 is the record date for the IT major’s fifth buyback in history. The record date is the cut-off date established by a company to determine which shareholders are eligible to participate in the buyback. At 9:40 am, the stock was quoting at Rs 388 on the NSE, lower by 0.14 percent from previous close.

Earlier in the year, Wipro‘s board approved the buyback for a minimum price of Rs 445 a share, which is roughly 15 percent higher than its current price of Rs 388. The size of the buyback offer is 4.91 percent of the total equity shares which, according to analysts, is good enough to get a decent acceptance ratio in the retail category.

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“We do believe that the acceptance ratio is likely to be north of 60 percent. In the last 4 buybacks, retail acceptance has been in the range of 50-100 percent, with 100 percent three times,” according to analysts at ICICI Direct.

The acceptance ratio is proportion of shares tendered or offered by shareholders that the company is willing to accept for repurchase. For non-retail investors, IIFL Securities expects acceptance ratio to be between 10 and 15 percent, considering 25-50 percent tendering by large shareholders.

The buyback offer’s opening and closing dates are yet to be announced.

Should you tender shares?

According to Ashish Gupta, an independent trader based out of Singapore, those who are holding the shares in their portfolio for a long term perspective can tender it in the buyback and based on the acceptance ratio can buy the accepted shares back.

“For example, if you hold 500 shares, you can tender them all and let’s say acceptance ratio comes in at 8 percent, in which case 40 shares will be accepted at 445 a piece, and you will be left with 460 shares. The remaining 40 shares can again be bought from the open market which is likely to be much less than the buyback price,” he said.

What analysts are saying

Gupta has over a decade of experience in trading equities and derivatives.

The Wipro stock has fallen 1.3 percent in 2023 so far and is down 8 percent over the past one year. As per Bloomberg, the stock has 12 Buy calls, 17 Hold and 17 Sell calls with a 12-month target of Rs 391, which is only 1.5 percent higher than current market price.

After the record dates of previous buybacks too, the stock had given mixed returns over 1-month and 3-month periods. This time, with outlook for IT services company being bleak, analysts believe it is unlikely for the stock to give positive returns.

Kotak Institutional Equities, for instance, has kept a “reduce” rating on the stock with a target of Rs 360 per share. Wipro reported a QoQ constant currency (CC) revenue decline of 0.6 percent, meeting lower end of its guidance band, it said. The firm has cut its FY2024-25e revenue estimates by 1-2 percent, leading to a 3-4 percent earnings per share cut.

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