Wipro gains 3% on announcing Rs 12,000 crore share buyback via tender route

Shares of Wipro were up 3.5 per cent to Rs 388 in Friday’s intra-day trade, after the company announced share buyback plan worth Rs 12,000 crore. The firm intends to buy back about 4.91 per cent of its shares at Rs 445 per share through tender route.

However, in the past one year, Wipro has underperformed market as shares fell 26 per cent, as against 5.4 per cent rise in the S&P BSE Sensex. The stock had hit a 52-week low of Rs 351.85 on April 17, 2023.

Meanwhile, the company reported 0.4 per cent decline in consolidated net profit to Rs 3,074.5 crore in the January-March quarter (Q4FY23) from Rs 3,087.3 crore, a-year ago, owing to macro-economic uncertainties, and cut downs on discretionary spending in key verticals.

In Q4FY23, revenue from operations grew 11 per cent to Rs 23,190 crore in Q4FY23 from Rs 20,860 crore, a year ago. Revenue, however, dropped 0.17 per cent on a sequential basis, and missed Bloomberg estimates of 23,460.30 crore.

The company’s IT services revenues declined 0.6 per cent quarter-on-quarter (QoQ) in constant currency (CC), while dollar revenues were up 0.7 per cent QoQ, and rupee revenues were down 0.2 per cent QoQ (despite rupee depreciation, could be timing of hedging).

The company expects the IT services revenue including India State Run Enterprise (ISRE) segment for the next quarter to drop one to three per cent sequentially.

During the fourth quarter, Wipro won total bookings of over $4.1 billion in total contract value (TCV) terms, up 29 per cent YoY in constant currency. The company has closed the year with highest-ever annual bookings.

Analysts at ICICI Securities believe that though Wipro signs strong bookings, the revenue conversion is still awaited on account of delayed ramp ups of existing deals as well delayed start for some of the new deal signing. They said this delay also reflected in weak Q1FY24 revenue guidance, and is also a reflection of possibly weak numbers from their consulting business (numbers not disclosed, but mid-teen revenue mix in our view).

"The company’s multiple discounts to large peers (~20 per cent discount vs Infosys and ~40 per cent to TCS) likely to stay or may be widened, if they continue to disappoint on growth prospects. We also observed that recent buyback by large peers didn’t help in stock price appreciation and we don’t see it playing out differently in case of Wipro," the brokerage firm added.

Analysts at Motilal Oswal Financial Services (MOFSL), meanwhile, said that as Wipro posted weak 4QFY23 earnings and guided muted H1FY24 peformance, they expect its FY24 organic growth to be one of the lowest among Tier-1 IT Services peers, with margin below the management’s medium-term guided range of 17-17.5 per cent.

The brokerage firm cut its FY24E/FY25E EPS by 7.2 per cent/4.4 per cent to factor in weaker FY24 growth due to a lower exit rate in 4QFY23 and muted 1HFY24.

“We maintain our 'neutral' rating as we await further evidence of the execution of Wipro’s refreshed strategy, and a successful turnaround from its struggles over the last decade before turning more constructive on the stock,” MOFSL added.