Wipro buyback: How to benefit from arbitrage opportunity

Our Bureau Chennai | Updated on October 20, 2020

Acceptance likely to be over 50% in under 500 shares category

Wipro last week announced a buyback of shares worth ₹9,500 crore, which is expected to be completed by December 2020. Wipro Ltd has approved a proposal to buy back up to 23.75 crore equity shares for an aggregate amount not exceeding ₹9,500 crore, being 4.16 per cent of the total paid-up equity share capital, at ₹400 a share.

ICICI Direct advises investors to tender shares in the buyback, especially those clients who hold up to 500 shares (retail category). “The acceptance ratio in this category is likely to be greater than 50 per cent,” it said.

Currently, as per SEBI guidelines, 15 per cent of buyback ₹1,425 crore in Wipro case) is to be reserved for retail category. This implies 3.56 crore shares can be tendered by retail investors based on the buyback price of ₹400/share.

As per Wipro’s annual report (FY20), there are 8.23 crore shares in more than 5 lakh accounts wherein the number of shares held are in the range of 1-5000 shares, the brokerage house said. SEBI guidelines lay down that 15 per cent of the total buyback amount should be reserved for small shareholders. ‘Small shareholder’ means a shareholder of a listed company, whose market value, on the basis of the closing price of the shares, as on record date, is not more than ₹2 lakh.


“Considering the closing value of Wipro on the record date at ₹400, a shareholder with up to 500 shares will be considered a small shareholder.

“At the current price of ₹340, the tender of shares in open offer can fetch a profit of ₹60/share on 50 per cent of positions (i.e. 250 shares * ₹60 a share = ₹15,000). The break even price for the residual shares will be ₹280,” ICICI Direct calculation revealed. However, this is a high risk trade in which acceptance ratio continuously varies, it cautioned. “We have arrived at a breakeven price of ₹280 per share base on assumption of 50 per cent acceptance ratio. However, if the acceptance ratio changes to 25 per cent the break even would be at ₹320 per share,” it further added.

Shares of Wipro on Monday closed at ₹343.25 on the BSE.and at ₹343.60 on the NSE.

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Published on October 19, 2020
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