Software major Wipro on Thursday announced a proposal to buy back 34.37 crore shares of the company for an amount of `11,000 crore. In June, 2016, the Bengaluru-based company had completed a buy back of shares worth Rs 2,500 crore.
The Wipro offer represents 7.06% of the fully paid up equity capital of the company. Shares will be bought back at `320 apiece, which is nearly 19% higher than the stock’s closing price on BSE on Thursday of Rs 269.
The stock has hit a 52-week high of Rs 283.93 and a 52-week low of 205.
Should the Wipro buyback be successful, India would have completed close to Rs 40,000 crore in 2017.
This would be the highest amount ever raised via buybacks; in 2016, buybacks worth Rs 27,000 crore were completed.
Wipro joins other IT majors like HCL Technologies, Tata Consultancy Services (TCS) and Mphasis which bought back their shares in 2017. Among the other firms that have bought back shares are Vardhaman Textiles, KPR Mills, SKF India, Jagran Prakashan and Gujarat Apollo Industries.
Wipro’s is the second-biggest buyback offer in 18 years. TCS’s buyback has been the biggest share repurchase offer during this period. TCS completed its repurchase of shares worth `16,000 crore on May 2017. In 2012, Reliance Industries bought back shares for an amount of `10, 440 crore.
Mphasis completed buyback of its shares worth RS 1,103 crore on May 2017. Last month, HCL repurchased shares worth Rs 3,500 crore. In CY17, companies have bought back nearly `30,000 crore worth of shares, a year in which the stock market has hit new highs. The Sensex has risen by 19.8% from January till July 20. On Thursday, the Sensex closed at 31,904.40.
Buybacks appear to have become the preferred route for companies to return wealth to shareholders, especially since dividend income, of over Rs 10 lakh per annum, is taxable at 10% in the hands of all residents, domestic companies, trusts or funds except those established for religious, educational or charitable purposes.
The government is also using the buyback route to tap the coffers of cash-rich PSUs ; it hopes to be able to meet its divestment target this way. Of the Rs 46,246.58 crore raised by the government through the disinvestment route in 2016-17, nearly Rs 19,000 crore after state undertakings offered their shares in buybacks.
Buybacks are the process by which companies repurchase their shares from stakeholders. The bought back shares are extinguished shrinking the firms’ equity base.