How Wipro Handed Back 2.6 Times Its Half-Year Profit To Shareholders

Wipro's second-quarter results, which landed below estimates and showed cracks in bottom line, also revealed that the company has paid shareholders over two-and-a-half times than what it has earned in fiscal year 2027 so far.

The IT major returned about Rs 17,000 crore to shareholders in the six months to September, which is roughly 2.6 times the profit it earned over the period, its audited results released on Thursday show.

The company spent Rs 15,051 crore on its share buyback, including Rs 51 crore of transaction costs, and paid Rs 1,978 crore in dividends, taking the total to Rs 17,029 crore. In comparison, the profit attributable to shareholders for the six months was Rs 6,553 crore.

Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay

The payouts were also about twice the Rs 8,593 crore Wipro generated from operations.

A One-Off Buyback

The buyback was a one-time event. Wipro bought back 60 crore shares, about 5.7% of its equity, at Rs 250 each, for Rs 15,000 crore. The board approved it on April 16, the tender window ran from June 11 to 17, and the shares were extinguished on June 25.

The price was about 23% above the April 8 NSE close of Rs 203.42, and 16.3% above the 60-day volume-weighted average price, according to a Wipro filing with the US Securities and Exchange Commission. The promoter group, which holds about 72.5% of Wipro, said it intended to tender shares.

The dividend was a smaller part of the payout. Wipro declared an interim dividend of Rs 2 a share in July, with a record date of July 27 and payment by August 14. In the same period last year, Wipro paid Rs 5,235 crore in dividends and had no buyback.

ALSO READ: Wipro Q2 Results: Net Profit Cracks 4.5%, Revenue Up 1%

Profit, EPS Mismatch

The September-quarter results show how the buyback changed the per-share picture. Net profit attributable to shareholders was Rs 3,200.6 crore, down 4.5% from the June quarter and 1.4% from a year earlier. Earnings per share, however, rose 4.2% from a year ago to Rs 3.23 from Rs 3.10, because there are fewer shares. Wipro's paid-up share capital is down 5.5% from a year ago, to Rs 1,981 crore.

The effect is clear against the June quarter too, as profit fell 4.5%, but EPS rose 0.9% to Rs 3.23 from Rs 3.20. The shares were extinguished on June 25, near the end of the June quarter, so the full effect of the lower share count shows up in the September quarter.

Revenue was Rs 24,753 crore, up 9.1% from a year earlier and 1.1% from the June quarter. Net profit came in below the Rs 3,306 crore analysts expected. Wipro's IT services revenue was flat from the previous quarter in constant currency, within the company's guidance of a 1.5% fall to a 0.5% rise in the December quarter.

Where The Money Came From

Wipro said in its buyback announcement that it would not use borrowed money from banks or financial institutions. Cash and current investments fell to Rs 43,654 crore at Sept. 30 from Rs 54,324 crore at March 31, a fall of Rs 10,669 crore, by our calculation from the balance sheet.

Borrowings were Rs 18,502 crore, up from Rs 16,787 crore at March 31. The filing does not say what the borrowing was for.

The business still generated cash. Operating cash flow for the six months was Rs 8,593 crore, up 14.6% from Rs 7,499 crore a year earlier, and 131% of net profit.

For shareholders whose shares were accepted, the buyback price was well above the market price when it was announced. For those who stayed, the share count is lower and each share has a claim on a larger share of earnings, but the cash that funded it is no longer on the balance sheet.

Notably, Wipro's results were approved at 3:40 pm on Thursday, after the market closed, so its Indian shares will react on Friday. However, the US-listed American Depository Receipts have already reacted adversely due to the weak guidance, having fallen 4.4% pre-market.

ALSO READ: IT Stocks Bounce After A Brutal Year: Is It Bottom-Fishing Or The Start Of A Rally?

Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.