Wipro mulls Rs 3,000-4,000 crore share buyback; follows TCS, Infosys to reward shareholders with cash

After Tata Consultancy Services and Infosys, now IT major Wipro is considering rewarding shareholders by distributing cash through a share buyback, which may amount to Rs 3,000-4,000 crore, topping the size of its last share repurchase in April 2016, CNBC TV18 reported citing unidentified sources.

The information technology major is in the process putting forth to the board a proposal, which will not consist of just this one proposed buyback, but will also suggest a detailed capital return policy for shareholders over the next three years, CNBC TV18 said.

The proposed policy seeks to ensure that Wipro ends up using at least 25-30% of its cash reserves as shareholder returns over a 3-year period, the report said. The policy is similar to rival Cognizant, which has kept 75% of cash reserves to be utilised towards shareholder returns over the next 2-3 years.

Wipro already announced in January an interim dividend of Rs 2 per share in order to part use its cash reserves.

Earlier last month, India’s largest information technology services provider Tata Consultancy Services said that it will buy back 5.61 crore shares through the tender route at a fixed price of Rs 2,850 per share on a proportionate basis for an aggregate amount of Rs 16,000 crore, comprising 2.85% of the company’s paid up capital.

Infosys, the second-largest IT firm, followed soon, amending its Articles of Association to add enabling provisions to buy back its shares, amid news about the company considering a share repurchase worth up to $2.5 billion (Rs 17,000 crore), representing 25% of its paid up capital.

Cognizant, the US-based Nasdaq-listed firm, which competes directly with Indian IT firms with several of its delivery centres being run out of India, had already announced in January a programme to return $3.4 billion of cash to shareholders through dividends and buybacks.

Shareholders and investors are pressing upon the IT companies to use their huge reserves to distribute cash to them, as opportunities for huge spurts of growth or bulk cash outgo seem unlikely. Analysts have pointed out to the maturity in the growth of the industry, low valuations, and scope for optimising capital allocation even after providing for any possible big-ticket acquisition.

Wipro Technologies (Wipro Ltd)