Wipro Share Buyback: To Participate or Not?

In recent news, Wipro has made headlines with its announcement of a massive buyback program worth Rs 120 billion (bn).

This move has been met with a sigh of relief by investors in the company, as the buyback price has been set at a substantial premium.

Also, the buyback's timing couldn't have been more perfect...many IT companies are struggling, and investors have been feeling cautious about their future prospects. The question now is whether this buyback will be enough to change the sentiment, at least for Wipro investors.

A share buyback enables a company to repurchase its shares from the capital market, for reasons such as rewarding shareholders using cash in hand.

Coming back to the buyback details...the IT major has announced a buyback of shares through a tender offer.

There are two ways in which companies can execute buybacks - the tender offer route and the open market offer.

In a tender offer, the company makes an offer to buy back shares at a particular price.

Here, the price is usually fixed at a premium and investors having shares of the company on record date can part with their shares by filling out respective forms over a given period.

In an open market offer, however, investors don't get much excited. In the open market offer, everything is routed through the stock exchange, and the price isn't fixed. It can vary.

With that explainer out of the way, here are the key details about Wipro's Rs 120 bn share buyback:

1) The board is yet to fix a record date for the same.

2) The IT company will buy back shares at Rs 445 per share. This is around 19% higher than its current market price of Rs 374.

3) The aggregate amount of buyback is up to Rs 120 billion (bn).

4) The total number of shares to be bought back shall be up to 269,662,921 shares representing 4.91% of the total equity.

Wipro's Rs 120 bn Share Buyback

Buyback price (Rs per share)	445
Current price (Rs per share)	374
Buyback premium (%)	19
No of shares proposed for buyback (million)	269.7
Buyback as proportion of total equity (%)	4.91
Buyback aggregate amount (Rs bn)	120
Buyback method	Tender offer route
Record date for buyback	Yet to be announced

Source: Equitymaster

This will be the fifth buyback by Wipro in the last seven years.

Let's take a brief look at the IT company's buyback history.

Wipro's rich buyback history

Prior to this buyback, Wipro announced a share buyback in 2016, 2017, 2019, and 2020.

The last buyback that Wipro carried was worth Rs 95 billion (bn) between 29 December 2020 to 11 January 2021. During the buyback, it had tendered 228.9 m shares worth about Rs 91.6 bn.

The share buyback price was Rs 400 per equity share which was at a 6% premium compared to the closing price on the date on which the buyback was announced i.e., 13 October 2020.

Before this, Wipro had launched a buyback program of Rs 105 bn between 14 August 2019 to 28 August 2019. The company bought back 323.1 m shares at Rs 325 per equity share.

The buyback was announced on 16 April 2019. The closing price on the said date was Rs 281.1. Here, the company bought back its shares at a 16% premium compared to the date on which the buyback was announced.

Back in 2017, the company announced a buyback proposal worth Rs 110 bn. Under the offer, it bought back 343.7 m shares at Rs 320 per equity share.

The company announced the buyback of shares on 20 November 2017. The company offered to buy back shares at a 9% premium compared to the closing price on the date of the announcement.

Earlier in 2016 too, the company announced a buyback offer. The company offered to buy back shares worth Rs 25 bn.

The buyback was announced on 20 April 2016, at an offer price was Rs 625, which was 4% higher compared to the closing price on the same day.

Here is a buyback history of Wipro at a glance:

Buyback year	Buyback announcement date	Buyback size (Rs in bn)	Buyback price per share (Rs)
2016	20-Apr-16	25	625
2017	20-Nov-17	110	320
2019	16-Apr-19	105	325
2020	13-Oct-20	95	400
2023	27-Apr-23	120	445

Source: Equitymaster

Should you participate?

Apart from buyback, the company also announced its results yesterday. The company missed estimates and reported flat growth in bottomline amid uncertainties in technology spending.

India's fourth largest company also guided for a revenue drop between 1% and 3% in the April-June quarter, owing to a negative demand outlook.

In the past two weeks, even TCS and Infosys announced their quarterly results. Both the IT majors didn't have anything exceptional to report. In fact, Infosys shares tanked over 10% after declaring its results.

All this suggests that the outlook for the IT sector remains uncertain for now. Wipro's buyback is currently offering investors the chance to cash in on the double digit buyback gains.

However, it's not rare for IT companies to offer such attractive buybacks at high double digit premium. In the case of Wipro, the company is offering a buyback, which could lead to a short-term gain for shareholders who participate in it.

However, investors should consider the long-term prospects of the company and evaluate whether tendering their shares in the buyback is the right decision for their investment goals.

How Wipro share price has performed recently

In the past one month, shares of Wipro are down around 5%. On a YTD basis, Wipro is down 4.6% In the past one year Wipro share price has fallen by 28.3%.

Wipro has a 52-week high of Rs 530 touched on 29 April 2022 and a 52-week low of Rs 351.8 touched today on 17 April 2023.

About Wipro

Wipro is one of the leading global IT, consulting and business process services companies.

Wipro was incorporated in 1945 as Western India Vegetables Product Limited. It was a consumer care product manufacturer till 1980 after which it diversified into the IT services business.

With effect from 1 April 2012, the company demerged its other divisions (consumer care and lighting, medical equipment, and infrastructure engineering) into a separate company called Wipro Enterprises Limited (WEL).

Wipro's operations can be broadly classified into IT Services, IT Products, and India State Run Enterprise.

For more details about the company, you can have a look at Wipro Company fact sheet and Wipro quarterly results on our website.

For a sector overview, you can read our IT sector report.

You can also compare Wipro with its peers on our website:

Wipro vs TCS

Wipro vs Infosys

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...