Wipro shares drop for 3rd straight day; what analysts say on share buyback

Shares of Wipro on Monday fell for the third straight session, as the stock turned ex-date for share buyback. There are rumours in the market that the share buyback may open on June 22 and that the expected settlement is likely in the first week of July. Wipro is scheduled to hold its 77th AGM on July 12 at 9:30 am IST through video conferencing.

Shares of Wipro fell 0.6 per cent to hit a low of Rs 379 on BSE. This was the third day of fall for the stock. The scrip has fallen 4.7 per cent for the three-day period.

Wipro has reserved 15 per cent, or 4 crore shares, for retail investors, amounting Rs 1,800 crore. Aamar Deo Singh, Head Advisory at Angel One anticipated the acceptance ratio to reach 40 per cent for the retail segment. He said the potential returns overall appear to be favourable. "However, it is important to keep in mind that share price performance for Wipro has changed in the past following share buybacks."

The Bengaluru-based IT firm is looking to buy back up to 269,662,921 shares of face value Rs 2 each on a proportionate basis, by way of a tender offer, at a price of Rs 445 per equity shares. A total of 15 per cent of the shares in the buyback are reserved for retail investors -- those who own less than Rs 2 lakh worth shares. Wipro promoters would be participating in the issue and could tender up to 3,91,74,17,716 shares.

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At Monday's price of Rs 379, the buyback offer price suggests a 17.41 per cent potential upside. The final number of shares the company will purchase from each shareholder will be based on the total number of shares tendered. It would depend on acceptance ratio, which suggests the percentage of tendered shares that will be accepted for repurchase. Accordingly, the company may not purchase all of the shares tendered by a holder of equity shares.

Anubhuti Mishra, Equity Research Analyst at Swastika Investmart noted that June 15 was the last date to buy Wipro's shares to be eligible to participate in the company's share buyback. "The share is currently trading around Rs 389, so as of today, the calculated premium is more than 14 per cent, so we will advise retail investors you to take part in this buyback. Furthermore, we anticipate an acceptance ratio of around 40 per cent, which has the potential to increase to 60 per cent. This expectation is supported by the fact that retail investors experienced an almost 100 per cent acceptance ratio in the previous buyback offer in 2020," Mishra said.

Technical outlook

Mileen Vasudeo, Senior Technical Analyst at Arihant Capital Markets noted that Wipro is trading below the 200-day SMA of Rs 392 and is showing sign of weakness. The stock, Vasudeo said, is underperforming the benchmark indices and that the the momentum indicators are also negatively poised. He beleives one can sell the stock at current prices with a stop loss of Rs 400 for a target of Rs 340–300 levels in the next couple of months.

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