Shares of Wipro rose 2% on Monday after the company said it would review a proposal to buy back shares this week.
“The company’s board of directors will consider the proposal to repurchase the company’s shareholdings, as well as necessary and incidental matters, at its meeting scheduled for April 26-27, 2023,” Wipro said in a regulatory filing on Sunday. The company is also expected to release its Q4FY23 earnings on April 27.
The last buyback conducted by Wipro was between December 2020 and January 2021, amounting to Rs 9,500 crore. During the period, Wipro bid for 96.38% of the total buyback size, amounting to Rs 9,156 crore. This follows the Rs 10,500 crore buyback programme launched by the company in August 2019.
Buybacks are expected to generally enhance return on equity by distributing cash and reducing the equity base, ultimately increasing long-term shareholder value. Additionally, buybacks will allow shareholders to increase their percentage holdings, enhancing long-term EPS.
Foreign brokerage JPMorgan said Wipro might opt for the tender offer route for its upcoming buybacks, as it did in the first three buybacks in FY2021/20/18, as the route allows promoters to participate.
Given the net cash on its balance sheet, it also expects Wipro to opt for a $12-1.5 billion buyback. However, if the buyback exceeds $1 billion, it will exceed 10% of paid-in capital and free reserves, it added, requiring shareholder approval. The brokerage has an “underweight” rating on the stock with a target price (TP) of Rs 360.
Shares were trading 1.62% higher at Rs 374 on the NSE at 11:18 am, while industry benchmark Nifty IT was trading 0.2% higher at 26,876.70.