Wipro’s largest buyback worth $1.7 billion gets Sebi approval

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Bengaluru, Apr 10: Wipro is set to announce its largest share buyback ever, worth $1.7 billion (Rs 12,000 crore), with market regulator Sebi clearing the decks for it.
This would be Wipro’s third buyback. It did a buyback of Rs 2,500 crore worth of shares in 2016 and Rs 11,000 crore worth of shares in 2017.
This time, the shares are expected to be bought back at Rs 320 a piece, a 17% premium to the prevailing share price of Rs 273 on the Bombay Stock Exchange (BSE). The price is 33% higher than the 6-month average share price of Rs 240.
A buyback can be done only once in 12 months, and Wipro last did it in November-December 2017.
There was lack of clarity on whether a buyback could be launched while a scheme of amalgamation was pending before the National Company Law Tribunal (NCLT). The latter is looking at Wipro’s proposal to merge four subsidiaries – Wipro Technologies Austria, Wipro Information Technology Austria, NewLogic Technologies SARL and Appirio India Cloud Solutions – with itself.
Wipro argued that there could be delay in the NCLT process because of the backlog of cases with it. The company said its shareholders expect a buyback because it is an integral part of its approach to returning surplus cash to them and they would have planned their investments accordingly.
Sebi, in an order dated February 15, allowed Wipro to go ahead with the buyback.
When contacted Wipro, the company said, “We have an articulated payout policy. We announced an interim dividend as part of our January 2019 earnings release. The Board evaluates our approach towards payouts on an ongoing basis. We do not have any additional comment at this point in time.”
On buyback as a tool to return surplus cash, Shailesh Haribhakti, founder and chief mentor of accounting & consulting firm Baker Tilly Desai Haribhakti Consultants, had this to say: “It’s an exceptionally good way to return what capital you cannot use to make the RoE (return on equity) that the business is making. It’s a tax efficient way to do so as recipients have no tax liability, but there is a buyback tax which the company will have to pay. It also raises the share price and aligns the capital to what is required for the business going forward.”
TCS, Wipro, Cognizant, HCL Technologies and Mindtree have all done share buybacks in the past few years.