Wipro's Board Nods for ₹ 9,500 crore Share Buyback Proposal

IT consulting firm, Wipro has approved the buyback of 237.5 million equity shares worth 9,500 crore being 4.16 percent of the total paid-up equity share capital, at a price of 400 per equity share.

At the company's earnings call, Jatin Dalal, CFO, Wipro states, "This is the right size from the need of the cash that we see. More importantly, it’s in line with what we’ve done in the past."

Furthermore, the company’s filings with the stock exchange hints that the shares account for about 4.16 percent of the total paid-up equity share capital.

On briefing the company’s share price, Jatin says, "You have to keep in mind that there is a tax outflow for the company which is roughly around 2,000 crore to 2,400 crore, on top of the 9,500 crore of the buyback. And, therefore, we have thought through that. We’re transparent in our communication that this 9,500 crore comes directly to shareholders and tax is excluded on that."

This buyback marks the company’s fourth attempt in the last five years, on the other hand, it is second when only Indian IT Service Company are considered for this fiscal year. Regardless of the good news, the company has witnessed its share price to take a hit by six percent on as markets that have opened on October 14 and even the analysts are being conscious.

 Commenting on the situation, Motilal Oswal Securities says, “We await further evidence of the execution of Wipro’s refreshed strategy and a successful turnaround from its growth struggles over the past decade before turning more constructive on the stock.”

Similar to Wipro, Tata Consultancy Services (TCS) has also announced the share buyback that is worth 16,000 crore post the company’s second-quarter earnings last week. TCS is also intending to pick 53 million equity shares for 6000 an equity share. This would amount to 1.4 percent of TCS’s total paid-up equity capital. 

According to the market regulator’s guidelines, an organization is permitted to buy back shares up to 10 percent of its net worth even without the approval of the shareholders. However, with the requisite approval, the company could buy about one-fourth of its net worth.

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