Wipro Ltd. will consider a proposal to buy back shares on Oct. 13—its fourth in the last five years and the second by an Indian IT company this fiscal.
The Bengaluru-headquartered company will also announce its earnings for the quarter ended September on the same day, it said in an exchange filing on Oct. 7, while not revealing other details about the buyback.
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The Azim Premji-founded company had, as on Sept. 30, net cash reserves of Rs 29,900 crore.
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Indian software service providers have been proactively returning excess cash on their books to shareholders. A buyback can be done only once in 12 months. Wipro had previously announced a buyback worth Rs 10,500 crore in 2019.
Wipro's larger peer, Tata Consultancy Services Ltd., announced a Rs 16,000-crore buyback on Wednesday—its third such exercise in the last four years. It had also announced a second interim dividend of Rs 12 per share.
A company can buy back shares up to 10% of its net worth without the approval of shareholders, according to the market regulator's guidelines. It can buy up to a fourth of its net worth with shareholder approval.
Madhu Babu, analyst at Centrum Broking, expects Wipro to have free cash flow of Rs 9,800 crore for FY21, representing a free cash flow yield of 7.7%. Even if Wipro spends Rs 12,000 crore on its next buyback through the tender route at Rs 280 per share, it will be huge trigger for its earnings in the subsequent quarters, he said.
Shares of Wipro have risen by nearly 36% so far this year, at a time when the Nifty Index rose 34%.
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