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Wipro shares gain 8% after buyback announcement, Q1 results

LiveMint logoLiveMint 21-07-2017 Ravindra N. Sonavane

Mumbai: Shares of Wipro Ltd on Friday gained as much as 8.2%, its biggest gains in four years, after the company announced larger-than-expected share buyback of Rs11,000 crore at a high premium of 24% from its previous close.

Wipro will buy back its shares at a price of Rs320 apiece. At 10.11am, the stock was trading at Rs288.30 on the BSE, up 7.2%. The scrip opened at Rs284.40 and touched a high of Rs291 a share or gained as much as 8.18%, its maximum gain since 29 July 2013.

This decision mirrors a trend followed by other domestic IT companies to keep investors’ faith in the stock due to challenges in the business amid pricing pressures and protectionist policies by US President Donald Trump, who has made norms to get H1B1 visa stricter for Indian employers.

Tata Consultancy Services Ltd (TCS) completed a Rs16,000 crore buyback in May, while Infosys Ltd has promised to return Rs13,000 crore to its shareholders through dividends and/or buyback this fiscal. HCL Technologies Ltd too is expecting to start its Rs3,500 crore buyback in the coming months.

Gains in the stock was also due to better-than-expected earnings. Wipro’s dollar revenue inched up 0.9% sequentially to $1.9 billion in the three months to June (0.3% rise in constant-currency terms). This better-than-expected show was primarily on account of higher spend from banking clients as the company reported a 4.1% sequential growth in BFSI, Mint reported.

The company reported 8% decline in its net profit to $321 million, while operating margin narrowed 150 basis points to 16.8% from 18.3% at the end of the March quarter. For the July-September quarter, the company expects revenue of $1.96-2 billion, implying quarter-on-quarter constant-currency growth between -0.5% and 1.5%.

“Wipro’s 1QFY18 performance was encouraging, but subdued guidance for 2Q indicates continued stress in the core legacy business. Wipro’s growth engine (ex-digital) remains challenged, and as per management, revenue growth will return to industry level growth-rate by 4QFY18. Sustained recovery in Energy and BFSI is encouraging, but communication (project closure) and healthcare (HPS) will continue to face headwinds,” said HDFC Securities in a report to its investors.

Of the analysts covering the stock, 10 have a “buy” rating, 20 have a “hold” rating, while 22 have a “sell” rating, shows Bloomberg data.

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