Wipro Board Approves Rs 11,000-Crore Buyback
Profit fell 8.1 percent sequentially to Rs 2,077 crore.
Wipro Ltd. will reward shareholders with a Rs 11,000-crore buyback even as a stronger rupee brought down margin and profit in the April-June quarter for the software services provider.
The board approved a buyback of 34.3 crore shares, or about 7 percent stake, at Rs 320 a piece, according to a stock exchange filing after its quarterly results. That’s an 18 percent premium to Thursday’s closing price.
The size of the buyback announced was completely “unexpected”, according to Sanjeev Hota of Sharekhan, who tracks information technology companies. The market was expecting a buyback of around Rs 5,000-6,000 crore, Hota added. Wipro’s last buyback was to the tune of Rs 2,500 crore.
The Azim Premji-led conglomerate’s net profit in the April-June quarter fell 8.1 percent sequentially to Rs 2,077 crore, the company said in an exchange filing, missing the Bloomberg consensus estimate by 10 percent.
Revenue fell 2.6 percent to Rs 13,626 crore. Revenue in dollar terms stood at $1.97 billion, higher than the company’s forecast in the previous quarter. Operating profit, or earnings before interest and taxes, declined 12.4 percent to Rs 2,174 crore while the operating margin contracted by 70 basis points to 16 percent.
"The impact on operating margins by rupee appreciation and salary increases was partially offset by strong business efficiencies", said Jatin Dalal, chief financial officer in a media statement. “We continue to sustain robust cash generation”, he added.
Wipro’s results, like its peers Infosys and Tata Consultancy Services, have demonstrated that no miracles are possible when macro-economic forces are unfavourable and uncertain, said Sanjoy Sen, a doctoral research scholar at Aston Business School in U.K. He added that "immigration push backs are prompting a rethinking on onsite deployment in international projects".
Guidance Disappoints
The outsourcer expects revenue to remain flat or lower in the next quarter between $1.96 billion and $2 billion , according to the statement.
UBS global research, in an emailed note, called the guidance "disappointing" adding that it expects a slightly positive reaction due to revenue beating estimates and the buyback announcement.
Income from its core IT services segment fell 2.8 percent to Rs 13,025 crore. The segment's operating margin contracted over 200 basis points to 16.8 percent during the quarter.
Retail services and healthcare IT services were the two “troubled segments”, Hota added. Profit in the retail business vertical declined 21.1 percent over the previous quarter, while revenue fell 3.1 percent.
The healthcare services vertical returned to profitability but revenue was still 6.3 percent lower than the previous quarter. Wipro had cautioned of a slowdown in the healthcare business citing uncertainty in the U.S. This is due to “regulatory changes happening in the U.S.”, according to Hota.
Shares of Wipro had closed 0.8 percent lower, ahead of the announcement, while the country's benchmark BSE Sensex fell 0.16 percent.
