Wipro Rolls Out ₹12kcr Buyback, Sees Dull Q1

This is Wipro’s fourth buyback since 2016. It announced buybacks worth ₹2,500 crore, ₹11,000 crore, ₹10,500 crore and ₹9,500 crore in 2016, 2017, 2019 and 2020, respectively.

The company has proposed to buy back 269.6 million equity shares worth 4.91% stake at ₹445 each, a premium of 18.9% to Thursday’s closing of ₹374.35 per share on the Bombay Stock Exchange.

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Wipro’s earnings performance was little different from that of its larger peers like Tata Consultancy Services (TCS), Infosys and HCLTech, reporting lower-than-expected revenue growth for the March quarter, as clients cut spending.

The company’s IT services revenue grew 11.1% to ₹23,289.3 crore in Q4FY23, against ₹20,967.5 crore during the year-ago quarter. IT services Ebit was up 7% at ₹3,758 crore year-on-year. Ebit stands for earnings before interest and taxes.

Despite falling below expectations, Wipro recorded its highest quarterly deal wins at $4.1 billion, up 28% annually. This comes at a time when the domestic IT sector struggles with the outlook for this fiscal, amid a cut in client spending across the West.

In its post-earnings press conference, Thierry Delaporte, managing director and chief executive of Wipro, said, “Looking ahead, we believe the macro environment will remain challenging. Our clients, industry and its many sectors are impacted by the prolonged uncertainty in the economic environment, and this has made an impact in our business and projections as well. For the next quarter, our sequential guidance is of -3 to -1% in constant currency. Our margins are expected to remain in the similar range in the recent quarters."

Wipro is not the first company to forecast weak revenue growth figures for FY24. On 13 April, Infosys projected an annual revenue growth of 4-7% for this fiscal, well below Street expectations. However, analysts said that Wipro’s overall revenue growth could improve later in the year, in the second half.

“The main impact for Wipro is its profitability in FY23. Even in terms of the share buyback, it may make sense from the board’s perspective since its shares are cheap at the moment, but this goes on to show that the company is not making significant investments in future innovation and technologies. Coupled with that, you also see the $100 million-plus contracts remain constant, so we’re likely looking at at least another two quarters of uncertainty, before the growth returns to the business," said Akshara Bassi, research analyst, global cloud and servers at market researcher, Counterpoint India.

Mitul Shah, head of research at brokerage firm, Reliance Securities, said, “Wipro’s revenue was broadly in line with our expectations, while its guidance for Q1FY24 is much below expectation. Considering its restructuring efforts, which include simplified operating structure, step-up in capability upgrade and talent management under new leadership in the medium-term with attrition decline supporting margin expansion, at present we have a ‘Buy’ rating on Wipro."