Wipro share buyback: Should you tender your shares?

New Delhi: India’s fourth-largest IT services outsourcer Wipro Tuesday announced a share buyback worth up to Rs 10,500 crore at price of Rs 325 per share which is a 15.7% premium to Tuesday’s closing share price of Rs 281.1 on the Bombay Stock Exchange.

Analysts believe the buyback offer price from Wipro is attractive and investors should use this opportunity to sell their Wipro share shift to other companies in the sector as the Bengaluru-based outsourcer reported its worst annual revenue growth since the financial crisis in 2008-09.

Wipro’s dollar revenue grew at 3.8% in FY19 to $8,120 million as against 4.3% growth reported in FY18 after adjusting for the divestment of hosted data centre services business. In comparison, TCS, India’s biggest outsourcer, reported 9.6% growth in dollar revenue at $21,913 and Infosys registered 7.9% rise in FY19 revenue at $11,799 million.

It may be noted that Wipro’s revenue growth has remained in single-digit for the past seven fiscals. In FY12, it had last reported double-digit revenue growth of 13.4% at $5,921 million. Slower revenue growth from Wipro has come at a time when its rivals like TCS, Infosys and HCL Tech have been reporting faster revenue growth. In June 2018 quarter, HCL Tech displaced Wipro to become India’s third largest IT outsourcer based on dollar-denominated revenue.

According to a report in the Economic Times, on a five-year compounded growth basis, TCS and Infosys grew their dollar revenue by 9.2% and 7.4%, respectively, while Wipro lagged at 4.2% growth between FY14 and FY19. HCL Tech is yet to declare results for the March 2019 quarter.

Also, the future prospects of Wipro don’t look bright as the company expects to grow revenue by at best 1% sequentially for the June 2019 quarter. The company seems to have slipped into the lower single-digit growth zone, say, analysts.