Better to tender shares in Wipro’s buyback: Analysts

The Bengaluru-based firm said for retail investors, the entitlement ratio – the indication of minimum shares that the company will definitely accept in the buyback – has been fixed at 23.4%, while for others, it is 4.3%. Analysts recommend retail investors tender shares in the buyback programme given the ongoing uncertainty in the sector.

Wipro will buy back 269.7 million shares from its shareholders on a proportionate basis through the tender offer. The buyback price is ₹445 per share, a 16% premium over Tuesday’s closing price of ₹382.55.

As per Sebi guidelines, 15% of buyback, which is about ₹1,800 crore in the case of Wipro, will be reserved for the retail investor category.

A retail investor is one whose holding value of Wipro shares is less than ₹2 lakh. At the entitlement ratio announced, Wipro will buy 62 shares from retail investors for every 265 shares held as on the record date of June 16. In the general category, the ratio has been fixed at 26 shares for every 603 shares held.”A low acceptance ratio of about 23.4% indicates a larger tender of shares from retail investors due to lack of confidence in the near-term recovery of the company and the sector,” said Manish Chowdhury, head of research at StoxBox. “In the larger IT space, we remain more comfortable with some other names as Wipro struggles on multiple fronts such as senior management exits, weak financial performance & guidance, and low operational efficacy and profitability vis-a-vis peers.”

Shareholders interested in tendering shares in the buyback process can do it through their stockbrokers. Investors whose shares have been accepted in the buyback will directly receive the payments by July 6. Unaccepted shares would be released by July 6, while shares bought back under the scheme would be extinguished by July 17.Shares of Wipro have declined 7.74% in the last one year compared to the 7.3% gains in the NSE IT index and 23% gain in the benchmark Nifty. According to the company, its earnings per share will improve from ₹20.73 to ₹21.79 after the buyback.

Analysts said shares of TCS and BirlaSoft are still trading well below their share buyback prices. TCS is currently trading at ₹3,227, a 40% discount to its last year’s buyback price of ₹4,500 apiece.