Wipro Announces Share Buyback Worth ₹9500 Crores Amounting To 4.16% Of Total Paid-Up Equity Shares

On Tuesday, Wipro announced it will buy back shares of ₹9500 crore, the second cash-rich IT company after larger rival Tata Consultancy Services announced a share purchase program last week.

India’s fourth-largest IT company will buy 4.16 percent of the total paid-up equity shares or 237.5 million shares at ₹400 per piece. Azim Premji, the founder chairman and the leader of the promoters group holds a 74.2 percent stake in the company, the country’s fourth-largest IT services firm. Wipro also announced the committed amount does not include taxes and other charges to be paid by the firm.

This is the second quarter in a row that the Bengaluru-based firm is going for a share buyback program. 

The company declared in a regulatory filing, the buyback is proposed to be made from the shareholders on a proportionate basis under the tender offer route. 

The company added, that the members of the promoter and promoter group of the company have demonstrated their intention to participate in the proposed buyback.

Last week, Tata Consultancy Services, India’s largest IT services company, announced a share buyback, the third such program of the Mumbai-headquartered company in the past four years.

buyback, worth ₹16,000 crore, is 1.42 percent of its paid-up capital. In August last year, Wipro too had completed a buyback of ₹11,500 crore. That amounted to repurchasing 5.35 percent of paid-up capital at that time.

Buybacks and dividends are both important to return cash to the shareholders in the global. 

The payback policy of the company is to return 45-50 percent of net income to the shareholders and the company chooses the model that is best for the shareholders.

Wipro showed a marked improvement in its performance in the quarter ended September 30, even though the company hasn’t reached the pre-Covid level yet. 

Wipro reported a net income of ₹2,484 crore, a growth rate of 3.4 percent year-on-year and 3.9 percent consecutively. 

The company’s consolidated revenue increased by 1.4 percent quarter-on-quarter at ₹15,100 crore, even though it was nearly flat year-on-year.

the company’s revenue in the key IT services segment, witnessed a marginal deterioration of 0.24 percent over the same period in the previous financial year while sequentially it grew 0.76 percent. The company’s operating margin of the  IT services business in the quarter was 19.2 percent, an improvement of 20 basis points over the previous quarter and 110 basis points year-on-year.

The company has resumed the practice of giving the revenue growth guidance, saying it was expecting its IT services revenue in Q3 to be $2,022-2,062 million, a growth rate of 1.5-3.5 percent consecutively.

“We had an excellent quarter with growth in revenues, expansion in margins, and robust cash generation, and I am excited about the opportunities that are ahead of us and encouraged by the acceleration in the business momentum we have seen this quarter,” said Thierry Delaporte, chief executive officer and managing director.

“The demand environment has improved from Q1. The intensity of sales continues to rise, and the pipeline is robust. The pace of decision making has improved though it is still a bit slow on larger ticket-hunting deals.”

The company’s growth during the quarter was broad-based and was led by the biggest vertical — banking, financial services, and insurance (BFSI) — which showed a growth rate of 5.4 percent on a sequential basis though on a year-on-year basis it declined 2.8 percent. 

In terms of geography, all the major markets of the company, including the Americas and Europe, improved their performance over the previous quarter through they lagged in comparison to the previous year.

“Wipro has reported in-line performance on both the revenue and margin fronts, while its revenue guidance for Q3FY21 remained slightly higher than our expectations,” said Sanjeev Hota, head of research, Sharekhan by BNP Paribas. 

The company said it decided to give promotions to 80 percent of its eligible employees in Q3 while it was exploring giving salary increments to junior employees who were hired through campus recruitment programs. 

“We will undertake a series of employee intervention programs,” said Saurabh Govil, president and chief human resources officer.