Wipro investors jittery over lack of clarity on promoters' participation in the buyback

Wipro's stock lost 6.5% in the afternoon session on Thursday, its biggest single session loss since April 22, 2013 when it had fallen by 8% by the end of the session.

Investors dumped the stock after the company guided for a lacklustre growth in the June 2016 quarter. What also spooked some investors was the lack of clarity on the procedure that the company would use for the buyback of shares.

The company announced on Wednesday a scheme to buy back up to four crore shares at Rs 625 per share. The promoter group, which has 73.3% stake, intends to tender a portion of their shareholding for the buyback. The details about the promoters' portion in the buyback are awaited.

What caused jitter among investors was the possibility of a pro rata purchase of shares under buyback since in such a case, majority of the benefit will go to the promoter group given its dominant stake in the company. What it means is if Wipro employs a buyback scheme where shareholders tender shares based on the percentage of their stake in the company, retail investors would be able to tender only up to one crore shares under the buyback scheme.

Apart from this, Wipro's lower June 2016 quarter revenue growth guidance did not go well with investors. The company expects dollar denominated revenue to grow by 1-3% in constant currency. Analysts estimate that if currency fluctuation is taken into account, revenue may even shrink.

This is in contrast with the bigger peer Infosys, which said revenue would grow faster than the average industry estimates for FY17. The slower growth trajectory of Wipro has prompted some of the brokerages including Credit Suisse and Morgan Stanley to downgrade the stock.

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