Wipro has informed that the Board will consider a proposal for buyback of equity shares of the Company at its meeting scheduled to be held on April 16, 2019. The last Wipro buyback was on a tender basis. The Board of Directors of Wipro Limited at its meeting held on April 16, 2019 has approved a proposal to buyback up to 32,30,76,923 equity shares (Thirty Two Crores Thirty Lakhs Seventy Six Thousand Nine Hundred and Twenty Three only) of the Company for an aggregate amount not exceeding Rs. 105,00,00,00,000/- (Rupees Ten Thousand Five Hundred Crores only) at a price of Rs. 325/-. Wipro Buyback represents 5.25% of its equity share capital and is through the tender route.
Wipro Buyback 2019, 2017 : Key Info
|MP befo announcement||281||259.85|
|MP after above||282||266.85|
|MP befo BM||290||269.15|
|MP after BM||286.4|
|Buy Back Price||325||320|
|% Premium on MP||12.07%||18.89%|
|BuyBack Size- Rs. Cr||10500||11000|
|BuyBack Size- Shares||323,076,923||343750000|
|Tot No.of shares||6,033,935,388||4866690771|
|Equity Capital- cr||1,206.79||973.34|
|FV of Share in Rs.||2||2|
|Buy Back Issue date||29-11:13-12-17|
|Shares reserved- Retail||48,461,538||51,562,500|
|Shareholders on RD||339382|
|Shares on RD||74395468|
Wipro Buyback : Acceptance Ratio Possibilities
This framework is based on estimation Wipro Ltd. shareholders who hold around 700 number of shares. To this we have added estimates for
1) Additional purchase of Shares by existing shareholders with eye on earning additional returns through buyback.
2) Purchase of Shares by Arbitrage investors & Inputs from last buyback
Based on approximations indicated above and considering a good tendering ratio, under normal circumstances Wipro Buyback could have acceptance ratio of 55-75% ( with slight upward bias) , a figure that will also depend to some extent on new arbitrage investors who buy into the stock and the tendering ratio.
Return Scenarios: Wipro Buyback
The absolute returns/Loss that may accrue to an Investors/Arbitrage trader are a function of Percentage Acceptance Ratio and Price Post Buyback. Investors may kept in mind that stock markets are quite volatile at this juncture and there are many political and other uncertainties. We have depicted some scenarios for Absolute Returns in a table form as a function of various possible combinations of Acceptance Ratios and Price Post Buyback.
|MP Aft Buybk|
- Wipro is a leading information technology, consulting and business process services company.
- Wipro delivers IT Services, Business and Technology Consulting, IT Outsourcing and System Integration services & solution.
- Wipro is one of the top three players in the Indian Information Technology (IT) industry— It has s diversified revenue streams with healthy revenue composition across various services lines and domains; and strategic alliances spread across geographies.
- With a track record of over 25 years in IT Services, Wipro is focused entirely on the global Information Technology business.
- Wipro is listed on National Stock Exchange and Bombay Stock Exchange in India and New York Stock Exchange.
- Wipro operates in over 50 countries serving clients across 6 continents and the company has a dedicated workforce of over 160,000.
Wipro : Price Trend, Summary of Financials
|Market Cap- Rs. Cr||1,69,735|
|Revenue FY18 – cr||54487.1|
|CMP in Rs.||281.3|
|Price / Earning (PE)||20.39|
|Price / BV||3.28|
|Sales 3 yr CAGR||5.09%|
|Debt / Equity Ratio||0.14|
|52 week High/Low||297.00 / 190.13|
Assessment: Wipro Buyback
- Wipro made an announcement on bonus shares along with its Q3FY19 results in the ratio 1:3. The RD for this was March 7, 2019
- Wipro reported 1.8% QoQ growth in IT services revenue in Q3FY19 in dollar terms (2.4% QoQ in Constant currency terms).
- Wipro has cash reserves of Rs. 28000 crore.
- For Q4Fy19 Wipro reported IT services rupee revenue at Rs 14,586.5 cr, Net profit at At Rs 2,480 Cr with slight fall in margins on QOQ basis. Analysts are not optimistic on prospects of Wipro in near future.
- Wipro management has indicated its intention to maintain payout policy of 45-50% of the profits. In fact in last one year the total payout to shareholders through buybacks has exceed 100% of the profits.
- There has been a security breach at Wipro, with reports that Wipro internal systems were hacked and were used to attack its customers. The stock fall today could have been due to this reason today. This presents a potential risk if the breach is found to be serious and has other implications which may include compensation that could be claimed by clients for damages.
- Earlier Wipro Buyback issue took relatively longer period to completion than similar buybacks. period
- Wipro being in F&O, Wipro Buyback may offer a reasonable opportunity to arbitrage investors primarily on account of expectations of a good acceptance ratio.
Standard disclaimer: Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering and Management . Iam also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2). This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/ Buy Back/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.