Wipro stock to turn ex-date for share buyback on Friday. Key details

Shares of Wipro will turn ex-date for share buyback on Friday. While the IT firm's guidance for June quarter was dismal, the stock has been holding up, gaining about 5 per cent since the Thierry Delaporte-led company announced the Rs 12,000 crore share buyback.

The Bengaluru-based IT firm had proposed to buyback up to 269,662,921 shares of face value Rs 2 each on a proportionate basis, by way of a tender offer, at a price of Rs 445 per equity shares. Wipro promoters have showed their intent to tender up to 3,91,74,17,716 Wipro shares.  As things stand today, the stock was quoting at Rs 391.10 level.

Wipro is yet to announce the timeline for the buyback, but has set Friday as the record date for the buyback. Wipro has reserved 15 per cent, or 4 crore shares, for retail investors,  amounting Rs 1,800 crore. The final number of shares the company will purchase from each shareholder will be based on the total number of shares tendered. It would depend on acceptance ratio, which suggests the percentage of tendered shares that will be accepted for repurchase. Accordingly, the company may not purchase all of the shares tendered by a holder of equity shares.

Aamar Deo Singh, Head Advisory at Angel One said: "Given that the Buyback premium is about 12 per cent of the current market value and that it is anticipated that the acceptance ratio in the retail sector might reach 40 per cent, the returns overall appear to be favourable. However, it is important to keep in mind that share price performance has changed in the past following buybacks. However, retail investors can still consider depositing some money to gain from it."

Foreign brokerage JPMorgan believes Wipro’s weak June quarter guidance highlights the challenging macro environment that will lead to a sharp slowdown in growth in FY24E and keep it under pressure in the absence of operating leverage.

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"Wipro’s higher consulting exposure keeps it at a higher risk of slowdown than peers. It warned while suggesting a target of Rs 350 in a note published on June 14. 

The Rs 12,000 crore share buyback is Wipro's biggest in terms of buyback size. If one includes the previous four share buybacks that the Bengaluru-based IT firm announced since 2016, the total buyback announced by the Azim Premji founded company stands at Rs 45,500 crore in eight years. The Rs 12,000 crore IPO would represent 4.91 per cent of total number of equity shares.

Motilal Oswal Securities in a recent note suggested that the large buy-back program (Rs 12,000 crore; Rs 14,800 crore including taxes) will deplete significant portion of cash and investments of the company and may hit its ability to maintain payout over FY24/25E.

Before this, Wipro came out with a Rs 10,500 crore share buyback in 2019. The buyback offer size was 32.31 crore shares, which were bought back at Rs 325 per share.

Wipro had announced a Rs 11,000 crore share buyback in 2017. That time, the company had offered to buy back 34.37 crore shares at Rs 320 apiece. The buyback shares represented 7.06 per cent of the total paid-up share capital then.

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