Wipro share buyback pushes stock price to 52-week high today; 4th buyback plan in last 5 years

Wipro share price surged 5.5 per cent to Rs 353.70 apiece on BSE a day after the company informed that its board will consider a buyback plan on October 13. This came on a day when the TCS board cleared a buyback plan of up to Rs 16,000 crore. Earlier this month, Wipro in an exchange filing informed that a meeting of the board of directors will be held over October 12-13, 2020 to consider and approve financial results for the quarter ended September 2020. “The board of directors will be considering a proposal of buyback of equity shares of the company in a meeting scheduled to be held on October 13, 2020,” Wipro said in a regulatory filing.

Wipro’s 4th buyback plan in last 5 years

The outcome of the board meeting will be communicated to the stock exchanges soon after the conclusion of the board meeting on October 13, 2020. Wipro became the second IT company to consider a buyback proposal this week after the TCS board cleared one. In April 2019, Wipro announced a share buyback of Rs 10,500 crore to repurchase 32.3 crore equity shares at a price of Rs 325 per equity share, which was at over 15 per cent premium to stock price back then. Similarly, the IT major brought back Rs 2,500 crore worth of shares in 2016 and Rs 11,000 crore worth of shares in 2017.

TCS’ buyback similar to buyback of FY18

On Wednesday, TCS announced a buyback plan of Rs 16,000 crore at Rs 3,000 per share and an interim dividend of Rs 12 per equity share. “TCS’ recent buyback is similar to its previous buyback of Rs 16,000 in the FY18,” research firm BOBCAPS said. In 2017 and 2018, TCS announced two equity share buybacks for an aggregate amount of Rs 16,000 crore. In 2017, TCS announced the Rs 16,000 crore share buyback plan at a price of Rs 2,850 per share, which was at a premium to the market value back then.  However, in 2018, TCS brought back 7.61 crore equity shares at a price of Rs 2,100 apiece, a 14 per cent premium to the stock price back then.

What to expect from Wipro Q2 results

Research and brokerage firm HSBC in its report said that Wipro has consistently under-performed peers in terms of revenue growth in the past five years, but the new management team and CEO provide hope of a turnaround. Deal wins were better in 1Q21 and sustenance of this improved and the more aggressive go-to-market strategy could lead to a sustainable improvement in revenue growth rate. “We raise our target PE. We increase our estimates slightly to factor in higher growth,” it said. While on the downside, it said that a prolonged impact of COVD-19 on global IT spending will be a key risk. “The company also has high exposure to the energy vertical, and a negative outlook on the IT spending post the recent fall in crude prices is a risk as well. And unfavourable currency movements are also a risk,” it said.

Research and brokerage firm Nirmal Bang in a report said that it expects Wipro to resume QoQ revenue growth guidance (1-3%) beginning 3QFY21 given the improved visibility. The management has indicated that 2QFY21 should be stable and there could be moderate growth as the intensity of deal conversions has picked up. “We will watch out for discussion on the medium-term strategy of the new CEO with possibly some financial goalposts, any top management restructuring driven by the new CEO,” it added. The report noted that the new CEO used the phrase ‘profitable growth’ as his goal. “How profitable and what level of growth he has in mind is still not known,” it said.