Wipro board approves Rs 9,500-crore share buyback; revenue up 1.4%

Wipro, India’s fourth-largest IT services company, on Tuesday approved a share buyback worth Rs 9,500 crore, having improved its performance in the second quarter of FY21 on several parameters, apart from giving a stronger outlook.

This is the second quarter in a row that the Bengaluru-based firm is going for a share buyback programme. 

The company is looking at buying 237.5 million equity shares, or 4.16 per cent of its paid-up capital, though the date of the programme has not been fixed. 

The buyback is proposed to be made from the shareholders on a proportionate basis under the tender-offer route, the company said in a regulatory filing. 

The repurchase price has been set at Rs 400 per share, a 6.25 per cent premium to Tuesday’s closing price. 

“Members of the promoter and promoter group of the company have indicated their intention to participate in the proposed buyback,” the company added.

Tata Consultancy Services, India’s largest IT services company, last week announced a share buyback, the third such programme of the Mumbai-headquartered company in the past four years. 

The buyback, worth Rs 16,000 crore, is 1.42 per cent of its paid-up capital. Wipro, too, had completed a buyback of Rs 11,500 crore in August last year. That amounted to repurchasing 5.35 per cent of paid-up capital then.

“Globally, buybacks and dividends are both important to return cash to the shareholders,” said Jatin Dalal, chief financial officer. 

“Our payback policy is returning 45-50 per cent of net income to our shareholders and we will choose the model that is best for our shareholders,” he added.

In the quarter ended September 30, Wipro showed a marked improvement in its performance though it is yet to reach the pre-Covid level. 

The company reported a net income of Rs 2,484 crore, a growth rate of 3.4 per cent year-on-year and 3.9 per cent sequentially. 

The consolidated revenue of the company, at Rs 15,100 crore, was nearly flat year-on-year while it increased 1.4 per cent quarter-on-quarter.

In the key IT services segment, the company’s revenue saw a marginal decline of 0.24 per cent over the same period in the previous financial year while sequentially it grew 0.76 per cent. The operating margin of the company’s IT services business in the quarter was 19.2 per cent, an improvement of 20 basis points over the previous quarter and 110 basis points year-on-year.

Wipro has resumed the practice of giving the revenue growth guidance, saying it was expecting its IT services revenue in Q3 to be $2,022-2,062 million, a growth rate of 1.5-3.5 per cent sequentially. 

ON RECOVERY PATH

• Company expects revenues to grow at 1.5-3.5% in Dec qtr
• Deal pipeline almost back to pre-Covid level; demand environment better
• To give promotions to 80% of eligible staff in Q3
• Looking at giving salary increment to junior employees

“We had an excellent quarter with growth in revenues, expansion in margins, and robust cash generation, and I am excited about the opportunities that are ahead of us and encouraged by the acceleration in the business momentum we have seen this quarter,” said Thierry Delaporte, chief executive officer and managing director.

“The demand environment has improved from Q1. The intensity of sales continues to rise, and the pipeline is robust. The pace of decision making has improved though it is still a bit slow on larger ticket-hunting deals.”

The company’s growth during the quarter was broad-based and was led by the biggest vertical -- banking, financial services, and insurance (BFSI) -- which showed a growth rate of 5.4 per cent on a sequential basis though on a year-on-year basis it declined 2.8 per cent. 

In terms of geography, all the major markets of the company, including the Americas and Europe, improved their performance over the previous quarter through they lagged in comparison to the previous year.

“Wipro has reported in-line performance on both the revenue and margin fronts, while its revenue guidance for Q3FY21 remained slightly higher than our expectations,” said Sanjeev Hota, head of research, Sharekhan by BNP Paribas. 

The company said it decided to give promotions to 80 per cent of its eligible employees in Q3 while it was exploring giving salary increments to junior employees who were hired through campus recruitment programmes. 

“We will undertake a series of employee intervention programmes,” said Saurabh Govil, president and chief human resources officer.