Wipro Buyback - Benefits of Buyback of Shares

Wipro Buyback - Benefits of Buyback of Shares


Last Friday (16-04-2019), the Public listed IT firm WIPRO announced its Quarterly results (Q4FY19) and moreover the newsletter about Buyback of Shares. This is the second time in the last 20 months that the company announced for the Buyback of Shares. On Friday, the shares of WIPRO went down about 2 percent, after the news of WIPRO employees' accounts may have been hacked.

The Board of directors of the company approved a proposal to buyback shares up to 5.35 percent of the Total Paid up equity share capital, which is about 32.30 Crore shares. There is an aggregate amount not exceeding of Rs. 10,500 Crore for the buyback and the record date will be announced later. It is noteworthy that WIPRO had said it will buy the shares at a price of Rs. 325/ per share through Tender Offer.

Where the retail investors were holding the WIPRO shares reasonably, and it would be said that about 90 percent of the shares will be buyback. Currently the Share price is trading at Rs. 281/- . However selling of shares to the company through Buyback is depends on the decision of an Individual investor.

In the recent years, there are so many listed companies were announced the Buyback offer for their Shareholders. So, let's see what is the good thing from the buyback being an Investor or Shareholder.

Generally, Buyback is a corporate action in which a company buyback its shares from the existing shareholders at a price which is higher than the current market price. So, the listed company's decision to reduce the outstanding shares in the market and also it increases the shareholding (Promoters Shareholding) percentage.

Buyback Methods: There are two types of Buyback for a public listed company. The first one is buyback shares through Tender offer. Here, the shareholders have the option to tender their eligible shares after the Acceptance ratio. The tender of shares for a shareholder is a limited time to submit his willingness.

The Second one is the listed company can buyback shares in the Open Market through Stock Exchanges in the period of time. Like Infosys had announced and done this in the past.

  • For an Investor or Shareholder, it is an opportunity to sell their holding shares at a premium price, which is higher than the current market price. So, they can get quick money in a short term or long term.

  • For a listed company, it is a chance to increase its shareholding percent, so the promoters are confident being in the business. They may also want to reduce the shares available in the public. Currently, the promoters holding percentage in WIPRO - 75 %

  • Usually after the buyback completion, the Earning per share(EPS) will improve or increase, so it will bring more shareholders in the upcoming days, when they need.

  • Getting positive on Return on Capital and Return on Net worth.

  • If there is any reserves or surplus cash available with the company, it will be used for the buyback. So, the investor can get the surplus cash  when it was not used by the company for its development.

  • When the shares are undervalued or thinly traded, the buyback is an additional exit route for the Shareholders.


Kindly share your views / comments with a smile :)

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