Buybacks vs business: Wipro’s ₹15,000 cr payout leaves investors cold as revenue declines for third straight year

Share buyback value of Wipro Ltd ₹The largest, ₹15,000 crore, failed to please investors a day after the announcement as fundamental weakness in its business overshadowed optimism about the buyback.

Shares of the nation’s fourth-largest IT services company fell 2.78%. ₹The day’s low was 204.35 at BSE close on Friday. ₹202.60. Much of the concern stemmed from a third consecutive year of revenue decline. Still, the company announced it would buy back 600 million shares ₹250 each.

Wipro’s annual revenue decreased by $756 million from its peak of $11.23 billion in FY23. The decline would have been even worse without the $130 million in revenue from three acquired companies.

Wipro’s lost revenue in the last three years exceeds the combined incremental revenue of LTM Ltd (formerly LTIMindtree), Mphasis Ltd, Coforge Ltd and Persistent Systems Ltd in FY25. Wipro finished FY26 with revenues of $10.48 billion, down 0.32% from the previous year. It ended FY25 and FY24 with revenue declines of 2.7% and 3.8%, respectively.

Experts attributed this weakness to slow capacity building and the inability to convert pipeline into actual revenue; The uncertain macroeconomic environment caused customers to pause their technology spending. At the same time, the Bengaluru-based IT services company has been generous to shareholders and willing to acquire companies.

Over the past three years, Wipro spent $481 million to acquire the three companies, translating to $130 million in revenue. Mint Examining company financials. During this time, Wipro also returned ₹32,900 crore ($3.55 billion) to shareholders – ₹14,517 crore through buybacks and ₹18,407 crore by way of dividends.

According to analysts, Wipro acquires businesses through acquisitions and returns money to shareholders through dividends and share buybacks.

“While there are concerns about growth, from a competency perspective the only acquisition was Harman Digital Transformation Services (DTS). Other deals have focused on connected customers or strategic vendor consolidation deals,” said Sushovon Nayak, principal IT analyst at Anand Rathi Institutional Equities.

Switch to AI

“Wipro has been late in developing AI-led capabilities compared to its peers Infosys, HCL Technologies and LTM, which have been more aggressive from an AI Generation perspective and have partnered with leading model labs like Anthropic and Open AI,” Nayak added. “However, the recent push into the AI ​​native and business platforms unit (to increase focus on AI capabilities) along with the recently launched Wipro Intelligence is a step in the right direction.”

Wipro acquired Harman DTS, the software services and engineering arm of the Connecticut-based audio products maker, in August last year for $375 million.

At least one brokerage firm said the company may be losing market share.

“While total booking growth for FY26 is healthy at 14% year-on-year and management’s commentary on technology budgets and deal pipelines remains positive, this optimism is not reflected in the guidance of -2% to 0% (-1.8% organic at the midpoint) in the first quarter. This is due to client-specific issues and delays in ramping up large deals. The disconnect between deal bookings and revenue growth points to AI-driven deflation and loss of market share.” ICICI Securities analysts Ruchi Mukhija, Aditi Patil and Seema Nayak said in a note dated April 17.

The company expects to start FY27 on a weak note, with revenue expected to be between $2.6 billion and $2.65 billion.

A delay in expediting large deals and slow revenue from high-end clients could put pressure on the company, according to a second broker.

“We model ~1.0% YoY CC (constant currency) revenue growth for FY27E, factoring in a weak start (1QFY27E revenue down ~1.0% QoQ) and near-term headwinds from increased delays, large customer decline and vertical weakness,” Motilal Oswal Financial Services analysts Abhishek Pathak, Keval Bhagat and Tushar Dhonde said in an April 16 note. he said.

marquee client

Most of the revenue drag came from consumer businesses, which accounted for almost a fifth of the company’s turnover. This followed a significant loss of customers. Wipro lost $100 million a year to Estee Lauder’s Accenture Plc. Mint It was reported on March 3.

Analysts at Motilal Oswal said “further improvement in execution and consistent conversion of deal TCV (total contract value) into revenue will be key to a constructive outlook.”

However, external factors have further increased Wipro’s troubles in the last three years.

“Wipro is likely to face higher pricing pressure in application and infrastructure maintenance services, where it has a higher share,” said Karan Uppal, principal IT analyst at Phillip Capital. “The slowdown in discretionary spending over the last few years has impacted the advisory practice, but client-specific issues are creating near-term challenges. Customer churn across client groups ($100 million+, $50 million+, $20 million+) sees Wipro losing market share relative to its peers.”

While the market remains unconvinced about the company’s turnaround plans, management is confident of transforming deal pipelines in the future as Srini Pallia enters his third year as Wipro’s chief executive officer on April 7.