Wipro Limited Buyback Offer 2023
(Updates 28Jun2023, 05Jun2023, 02Jun2023 and 27Apr2023 are available below. Even though this blog was posted originally on 24Apr2023, I will be continually updating this blog whenever new information is made available on the buyback offer.)
(This
is for information purposes only. This should not be construed as a
recommendation or investment or tax advice even though the author is a CFA Charterholder. Please consult your financial
or tax adviser before taking any investment decision. Safe to assume the author has a vested
interest in stocks / investments discussed if any.)
Wipro Limited on 23Apr2023 (on a market holiday, that is, Sunday) announced, through a stock exchange filing, that its board of directors would meet on 27Apr2023 to
consider, among other things, a proposal to buy back the company's fully paid-up equity shares with a face value of Rs 2 each.
2. As at close of 21Apr2023, the company's share price was Rs 368 per share, with a market cap of Rs 2.02 lakh crore. On 24Apr2023 when the market opened, the stock reacted positively and rose by 2.7 percent to close at Rs 378, with a market cap of Rs 2.07 lakh crore.
(story continues below)
(I have, over the years, analysed a number of companies' buyback offers. You can check them in the related blogs section below)
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Kaveri Seed Company Buyback Offer 2022
Infosys Limited Buyback Offer 2022
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Crompton Greaves Buyback Offer 2013
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3. The
trailing 12-month or TTM price-earning or P/E
ratio of the stock is 17.9, its price-to-book or P/B ratio is 2.9 and
its price-to-sales or P/S ratio is 2.3 (all as on 24Apr2023). See the
following screenshots for more on valuation and peer comparison
>
4. In general, buyback offers take three to six months to complete depending on which route the company takes for buyback. (There
are basically two routes companies take for share buybacks or
repurchases -- one is 'tender offer' route and another is 'buyback in open market via stock exchanges.') So,
it's necessary for investors to follow activities related to the
buyback offer throughout the process.
A typical list of activities is
given in table 1 below >
5. To the best of my knowledge, the company has made four buyback offers in the past, between 2016 and 2020. All these four offers were made through 'tender offer' route; in which, the promoters participated in all the buyback programmes.
The details of the buyback are given in table 2 below >
7. As shown in above table 2, the prices of previous buyback offers in 2016, 2017 and 2019 (adjusted for 1:3 bonus issue in Mar2019 and 1:1 bonus in Jun2017) through tender offers were above the current market price of Rs 378 per shares. So, it'll be interesting to see at what price the company will fix the buyback price in the current proposal.
8. Details of what
percentage of equity shares were extinguished during the previous four buyback offers
are given in table 3 below. The company extinguished a total of 16.9 percent of total outstanding shares in the past
four buyback offers.
Table 3 also contains details of promoters' holding pre- and post-buyback. The promoters' stake has been more or less the same at 73 percent between 2016 and now.
9. Based on the past four buybacks and high promoters' stake in the company, it could be surmised that the company would take the 'tender offer' route for the buyback offer proposal. However, the exact route will only be known once the Board reveals its decision at its scheduled meeting on 27Apr2023.
10. The company's quarterly results also will be declared during the Board meeting on 27Apr2023. So, it may be better for investors to wait till the quarterly results are declared and the buyback route is known.
11. After Infosys Limited, a giant in the India's information technology services sector, declared poor quarterly results 10 days ago, it is better for investors to remain cautious on IT services sector's prospects.
Update 27Apr2023
12. As As scheduled, the company's board of directors, during their meeting on 27Apr2023 announced brief details of the buyback proposal. Like
the past four buyback offers, this time too the company has chosen the
'tender offer' route to buy back its own equity shares. And the record date (as well as ex-date) for buyback is yet to be declared. (The company also declared its fourth quarter results today). The company proposes to buy back 26,96,62,921 equity shares, being 4.91 percent of company's total paid-up equity capital.
The brief details are given in table 4 below >
13. As shown in above table 4, the offer size is Rs 12,000 crore, which is the biggest size of all buyback offers. The total buybacks, including the current proposal, amount to Rs 45,500 crore.
14. The proposed buyback price is Rs 445 per share, which is 11.25 percent higher than the previous buyback (2020) price of Rs 400.
15. The stock closed today at Rs 374.90, with a market cap of Rs 205,748 crore.
The updated table 2, comparing all the four buyback offers via 'tender offer,' is given below >
16. Once the current buyback proposal is completed, the company would have extinguished a total of 20.80 percent of the total paid-up equity capital in all the buyback offers since 2016. Reduction in equity capital (which boosts earnings per share and other profitability metrics) of more than 20 percent, in a seven-year period, is a significant development in the capital allocation strategy of a company.
Update 02Jun2023 - Record Date
18. The e-voting for the special resolution started on 03May2023 and ended on 01Jun2023 and results were declared on 02Jun2023.
19. After market hours on 02Jun2023, the company submitted a copy of the Special Resolution passed by company's shareholders approving the buyback.
20. After submitting Postal Ballot results and a copy of the special resolution (as stated in para 17 and 19 above), the company on 02Jun2023 announced record date for the buyback. The record date (same as ex-date) is 16Jun2023.
Update 02Jun2023 - Small Shareholders' Action
21. 'Small shareholders' (as defined by capital market regulator SEBI) are shareholders of a company holding shares valued not more than Rs 200,000; based on the closing market price of the share on BSE or NSE having the highest trading volume as on the record date (record date in this case is 16Jun2023).
23. In buyback offers (tender route), 15 percent of the total shares proposed to be bought back or number of shares entitled as per their shareholding, whichever is higher, should be reserved for small shareholders, as per SEBI's Buyback Regulations.
Reserved category for small shareholders:
(a) The company proposes to buy back 26,96,62,921 equity shares (see para 12 above). A total of 15 percent of this total will be reserved for small shareholders -- that is, 4,04,49,438 shares.
(b) Number of shares* as per entitlement of small shareholders as on record date will be known only after the record date (that is, 16Jun2023).
Total number of shares reserved, in the buyback offer, for small shareholders will be (a) or (b), whichever is higher.
[* as per the latest available shareholding pattern as on 31Mar2023, public shareholding (other than mutual funds, institutions and foreign portfolio investors) is 10.12 percent of the total equity shares of the company -- this 10.12 percent is less than the 15 percent minimum buyback shares reserved for small shareholders -- so, practically 4,04,49,438 shares, as stated in para 23 (a) above, are likely to be reserved for small shareholders, unless the shareholding pattern changes drastically between 31Mar2023 and the record date]
24. The small shareholders' entitlement ratio depends on the share's market price as on the record date (see para 22 and 23 above). So, it is hard for prospective investors to guestimate the entitlement ratio before the record date. If there is too much volatility in the share price between now and the record date, the shareholding pattern may undergo a drastic change, upsetting the best guestimates of investors.
In general, the entitlement ratio will be announced in the Letter of Offer by the company. Letter of Offer will be released by the company, four or five days after the record date. In Wipro's case, the actual entitlement ratio will be known only after, say, 20Jun2023, as per my limited understanding of the buyback offers through tender route.
Update 02Jun2023 - Timeline of Events
The updated schedule of activities for follow-up >
Update 05Jun2023
The stock today closed at Rs 404.55 per share, with a market cap of Rs 222,020 crore.
The Letter of Offer is likely, as stated in para 24 above, to be announced on or after 20Jun2023.
Update 28Jun2023
(I'll
be updating this blog as and when new developments take place in
relation to the buyback offer -- to comment on business model, profit,
solvency, liquidity, shareholding pattern, MF holdings, whether buyback
from debt, capital allocation optimal, etc.)
- - -
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References:
SEBI (Buyback of Securities) Regulations, 2018 (last amended on 03Aug2021) - SEBI Buyback norms - SEBI buyback regulations
SEBI -Securities and Exchange Board of India
BSE - BSE Limited
NSE - National Stock Exchange of India Ltd
Post buyback announcment 15Jan2021
Post buyback announcment 10Sep2019
Post buyback announcment 19Dec2017
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When Is The Next Buyback Offer Likely To Be?
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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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He blogs at:
https://ramakrishnavadlamudi.blogspot.com/
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