Wipro Ltd. announced its third share buyback in four years to reward shareholders.
The software services provider will repurchase 32.31 crore shares, representing 5.35 percent stake, at Rs 325 apiece, according to its stock exchange filing. It's a 16 percent premium to the current market price. The repurchase will be worth about Rs 10,500 crore.
Indian information technology companies have been proactively returning excess cash on their books to shareholders over the past two years. The top five companies by market capitalisation returned more than Rs 1.17 lakh crore to their shareholders through share buyback programmes and dividends between January 2017 and January 2019.
A buyback can be done only once in 12 months. Wipro had previously announced a buyback worth Rs 11,000 crore in 2017. The company's first buyback in 2016 was worth Rs 2,500 crore.
Buybacks improve earnings per share, while also supporting share prices during periods of sluggish market conditions. A recent study by the Institutional Investor Advisory Services suggested that excess cash on the books may also drag down return ratios for shareholders.
A company can buy back up to 10 percent of its net worth without the approval of shareholders, according to guidelines of the Securities and Exchange Board of India. The company, however, can buy back up to 25 percent of its net worth with the approval of its shareholders.
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