Should Wipro Investors Tender Shares In Rs. 10,500 Crore Buyback?

In a statement to the exchanges, Wipro Ltd said its board has approved the proposal to buyback over 32.30 crore equity shares that amounts to 5.35 percent of the total paid-up share capital for Rs 10,500 crores in the meeting held on Tuesday. These shares will be bought at a price of Rs 325 apiece.

The offer comes in a bid to provide more value to the company's shareholders.

And here after the company has announced its earnings results for the quarter ended March, we will look at how good is the latest buyback offer for shareholders to tender their share.

Details of the buyback:

The buyback price is a pretty 15.7% higher than the closing price of Wipro's share of Rs. 281.1 on the BSE.

Members of the promoter and promoter group of the Company have indicated their intention to participate in the proposed buyback. Also, the record date and timelines regarding the buyback will be announced in the coming days.

Previous buybacks by Wipro:

In the past also, the IT major Wipro had announced a buyback worth Rs 11,000 crore in 2017 and its first one in 2016 was worth Rs 2,500 crore. Share buybacks can be done only once in 12 months.

Revenue growth has been in single digit for past several years:

Though the company's profitability as well as revenue from digital business has registered remarkable growth, there are certain negatives which cannot be ignored either. And in fact as per a leading business dailies report, the FY 19 can turn out to be the worst year in respect of its topline growth.

The company has been consistently reporting single digit revenue growth for last seven fiscal years and for the FY 19, its revenue growth came in at just 3.8% to $8,120 million in comparison to the previous year fiscal's revenue growth of 4.3%. This is after taking into account the divestment proceeds from hosted data centre services business.

Wipro no more at number 3 spot in the IT industry :

For the June 2018 quarter, HCL even pipped Wipro to be number three on the basis of dollar denominated revenue.

On a 5-year compounded growth basis also, Wipro lags its peers with just 4.2% growth between FY14 and FY19, whereas TCS and Infosys reported growth in dollar topline by 9.2 and 7.4%, respectively.

Should investors tender their shares?

Also, as the guidance for revenue growth for the June 2019 quarter has been at best placed at 1%, investors can't be optimistic about company's future prospects. So given the financials, investors can consider to tender their share in the buyback and make a switch into other better money-making opportunities.

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