Wipro acquires 60% stake in Aggne Global; here's how analysts interpret the move

Wipro share price: Shares of Wipro declined over 2 per cent in Wednesday's trade (February 12) on the BSE, snapping a three-day winning streak. The stock slipped a day after the IT company announced the acquisition of Aggne Global.

"Wipro Limited, a leading technology services and consulting company, today announced that it has made a significant investment in Aggne, a leading consulting and managed services company serving the insurance and insurtech industries," the filing read.

At around 12:57 a.m., shares of Wipro traded 1.44 per cent, or Rs 7.35, lower at Rs 504.8 apiece. Meanwhile, its market capitalisation stood at Rs 2,63,676.62 crore at around the same time.

While some analysts attribute the decline to concerns about the price paid and integration risks, others think all IT stocks have declined due to higher-than-expected inflation in the US reported on Tuesday, and Wipro shares slipped as part of the pack.

What does the acquisition mean for Wipro?

Global brokerage Morgan Stanley sees it as a tuck-in acquisition that will strengthen Wipro’s capabilities in the insurance sector.

A tuck-in acquisition occurs when a large entity completely absorbs a smaller one.

The brokerage maintained an 'underweight' rating on the stock and has given a target of Rs 460 apiece.

Atul Parakh, CEO of Bigul, believes that the deal expands Wipro's presence in key markets and boosts its capabilities. 

"While in the short term, it may be wary, from a long-term perspective, this is a strategic move to accelerate growth through M&A. The focus now should be on successful integration and executing cross-selling opportunities," said Parakh.

The expert added that it is crucial to monitor management's progress in realising expected synergies before fully assessing the deal's impact.

"The impact of the acquisition will be positive, as it is not only revenue and profit accretive but also strengthens Wipro’s capabilities to deliver higher-impact transformation in large insurance deals faster, significantly improving their value proposition, especially for the P&C insurance sub-sector," said Saurabh Uboweja, Advisor on Positioning Strategy & Senior Partner at BOD Consulting. 

However, the financial impact of the deal will be visible after a few quarters of focused efforts to successfully integrate Aggne’s teams and capabilities with Wipro’s technology platforms and access to large insurance clients, Uboweja added.

Wipro share price: Past performance

In a year, shares of Wipro have gained over 24 per cent against the Nifty50's rise of over 22 per cent.

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