Wipro has announced a share buyback plan priced at Rs 250 per share, representing a 23% premium over its last closing price of Rs 203.11 on the NSE. This marks the IT giant's first buyback in nearly three years and involves repurchasing up to 60 crore shares, which is 5.7% of its total paid-up share capital, for a total of Rs 15,000 crore.
The buyback, approved by Wipro's board in April, will be conducted via the tender route. Shareholders holding shares in their demat accounts on the record date, June 5, including those who converted American Depository Receipts (ADR) to equity shares, can participate. The company's promoters have also indicated their intention to partake in the buyback.
According to market regulations by SEBI, 15% of the buyback offer is reserved for small shareholders. For Wipro, this translates to approximately 9 crore shares worth Rs 2,250 crore at the buyback price. The entitlement ratio for retail investors is expected to be around 30.8%, while for the general category, it is projected at 5%.
“Retail investors looking for short-term opportunities can buy the shares of Wipro. Based on the last two buybacks of Wipro and very low retail shareholding, we expect the acceptance ratio to remain high in the range of 50-60% which could give a potential return of 11-13% (pre-tax) with a time frame of 2-3 months.”
Motilal Oswal Wealth Management
Motilal Oswal Wealth Management anticipates that the entitlement ratio for retail investors might decrease as participation increases closer to the record date. However, the actual acceptance ratio is expected to be high due to the eligibility criteria of 800 shares for the retail portion.
SAMCO Securities views the buyback as a tactical opportunity with a high acceptance ratio, potentially offering a return of 11-13% pre-tax over 2-3 months. They recommend selective participation due to the balanced risk-reward scenario.
“Overall, we view Wipro’s buyback as a tactical opportunity rather than a guaranteed arbitrage. The risk-reward appears balanced, with limited downside and attractive upside in favourable participation scenarios. We recommend selective participation, as outcomes remain contingent on acceptance dynamics.”
SAMCO Securities
Background
Wipro's buyback is part of a broader strategy often used by companies to enhance shareholder value, utilize surplus cash, and prevent hostile takeovers. This corporate action comes at a time when the IT sector is navigating through global economic uncertainties.
As the buyback window and entitlement ratio details are awaited, investors will be keenly observing the acceptance dynamics and market conditions. The buyback could present a lucrative opportunity for retail investors looking for short-term gains.
