Wipro, India's fourth largest IT company
IT services major Wipro has announced share buyback of Rs 15,000 crore. In which the price of each share has been fixed at Rs 250. Brokerage firms have advised investors to buy shares of the company to participate in this buyback, and have given several reasons for this. This buyback price is more than 25 percent premium over the previous closing price of the share on NSE (Rs 199.36 per share). This is Wipro's first buyback announcement in almost three years. Let us also tell you how many shares Wipro is buying back from the market. Also, what kind of advice has been given to investors by experts on this.
How many shares are you planning to withdraw?
Wipro's board has approved the plan to buy back shares up to Rs 60 crore. These shares constitute 5.7 percent of the total paid-up share capital of the company, and a total amount of more than Rs 15,000 crore will be spent for them. This buyback will be done through 'tender route'. All shareholders present on the record date – including those who have received equity shares after cancellation of their American Depository Receipts (ADRs) – will be eligible to participate in this corporate action. Wipro said that the promoters and promoter group have expressed their intention to participate in this proposed buyback. The record date is yet to be announced to decide the eligibility of shareholders, acceptance ratio of shares and other details.
Experts' opinion on Wipro buyback?
Keeping in mind Wipro's past buyback trends and relatively low pattern of retail shareholding, HDFC Securities has put forward two possible investment scenarios. In the 'conservative' scenario, the domestic brokerage firm estimates the acceptance ratio to be slightly lower—about 45-50 per cent—compared to the previous offer. The firm said that this is an excellent short-term opportunity for retail investors, which can give them a potential return of 8-9 per cent (net) over a period of 2-3 months.
In the 'aggressive' scenario, HDFC Securities said there is a strong quantitative basis to estimate the acceptance ratio of retail shares to be between 70-80% (this ratio was 78 per cent in 2023). The firm further said that this is a short-term opportunity for retail investors, which can give them a potential return of 13-14 per cent (net) over a period of 2-3 months. Given this track record of excellent performance and the potential for stable returns amid current market volatility, the acceptance ratio is expected to be quite high. Therefore, we recommend a strategic 'Buy' for retail investors who want to improve their short-term capital allocation by participating in the upcoming offer.
At the same time, Motilal Oswal Wealth Management said that retail investors who are looking for short-term opportunities can buy shares of Wipro. Based on Wipro's last two buybacks and very low retail shareholding, we expect the acceptance ratio to be high in the range of 50-60 per cent, giving a potential return of 11-13 per cent (before tax) in 2-3 months' time.
