Shares of Wipro, the Bangalore-based IT giant, have experienced a 3% rise in their price as the company is contemplating a share buyback. The company’s board is set to meet next week to discuss the matter.
A share buyback occurs when a company purchases its own outstanding shares from the market, which results in a reduction of the number of shares in circulation. This often leads to an increase in the value of the remaining shares, as the earnings of the company are spread over a smaller number of shares.
Wipro has previously undertaken share buybacks in 2016 and 2019. The 2016 buyback was worth Rs 2,500 crore, while the 2019 buyback was worth Rs 10,500 crore. Reports suggest that the current buyback could be in the range of Rs 9,500-10,500 crore.
A share buyback can be seen as a way for the company to return capital to its shareholders, as it increases the value of their shares. It can also be a way to signal to the market that the company believes its shares are undervalued. However, some investors may prefer that the company uses the cash for other purposes, such as investing in new projects or paying out dividends.
Wipro has been performing well in recent years, with a strong focus on digital transformation and innovation. The company’s revenue for the fourth quarter of FY21 was $2.2 billion, a 3.9% increase year-over-year. Its net profit for the quarter was $407 million, a 28.9% increase year-over-year. The company’s stock has been performing well, with a 40% increase in its price over the past year.
The company has also been making strategic acquisitions to strengthen its capabilities in emerging technologies. In March 2021, Wipro announced the acquisition of Capco, a global management and technology consultancy, for $1.45 billion. The acquisition is expected to help Wipro expand its offerings in banking and financial services.
The IT industry as a whole has been performing well, as the pandemic has accelerated digital transformation and increased demand for technology services. The sector is expected to continue growing in the coming years, as companies across all industries look to leverage technology to stay competitive.
Wipro is not the only IT company that has been considering a share buyback. Tata Consultancy Services (TCS) recently announced a buyback of up to Rs 16,000 crore, while HCL Technologies is also reportedly considering a buyback.
Overall, a share buyback can be a positive signal to the market, indicating that the company believes its shares are undervalued and that it has confidence in its future prospects. However, investors will be watching closely to see how the company plans to use its cash, and whether a share buyback is the best use of its resources.
As of the time of writing, Wipro’s stock was trading at Rs 471.50, up 3.05% from its previous close. The stock has a 52-week high of Rs 508.25 and a 52-week low of Rs 221.50.
The company’s board meeting next week is expected to provide more details on the potential share buyback. Investors will be eagerly awaiting the outcome of the meeting to see how the company plans to allocate its resources and continue its growth trajectory.
In conclusion, Wipro’s decision to consider a share buyback reflects the company’s confidence in its future prospects and its commitment to returning value to its shareholders. The IT industry as a whole is expected to continue growing in the coming years, and Wipro’s focus on digital transformation and innovation should position it well for future success. Shareholders can look forward to a growing dividend stream, as well as the potential for capital appreciation from future share buybacks and other initiatives.
