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Wipro investors can consider the buyback offer as growth slows


ET Intelligence Group: IT services major Wipro reported improved profitability and higher share of digital revenue in the fiscal ended March 2019. It also exhibited efficient cash flow management and declared a share buyback worth up to Rs 10,500 crore in a bid to increase payback to shareholders.

But, these encouraging developments fail to highlight the stark reality that the country’s erstwhile third- largest IT exporter closed what may go down as its worst year in terms of the topline growth since the days of financial crisis in 2008-09.

Its revenue grew 3.8 per cent to $8,120 million in FY19 compared with 4.3 per cent growth in the prior fiscal after adjusting for the divestment of hosted data centre services business. The company’s revenue growth has remained in single-digit for the past seven fiscals. The last time it clocked a double-digit growth was in FY12 when revenue grew by 13.4 per cent to $5,921 million.

This is at a time when peers including Tata Consulting Services (TCS), Infosys, and HCL Technologies have been reporting faster revenue growth. HCL Tech even displaced Wipro from the third spot in the pecking order based on dollardenominated revenue in the June 2018 quarter.

On a five-year compounded growth basis, TCS and Infosys grew the dollar topline by 9.2 per cent and 7.4 per cent, respectively, while Wipro lagged at 4.2 per cent growth between FY14 and FY19. HCL Tech is yet to declare results for the March 2019 quarter.

The future prospects don’t look bright either given that Wipro expects to grow revenue by at best 1 per cent sequentially for the June 2019 quarter. The company seems to have slipped into the lower single-digit growth zone.

Given this, the company’s latest buyback offer at Rs 325 per share may look lucrative for investors who wish to shift to other companies in the sector. The buyback price is 15.7 per cent higher that the Tuesday’s closing share price of Rs 281.1 on the BSE.

Source: Economic Times