Wipro share price: Sharekhan maintains Buy with an unchanged price target of Rs 510
Wipro has entered into an agreement to acquire The Capital Markets Company (Capco), an end-to-end management consulting services and digital transformation solutions provider in the banking and financial services space, in a $1.45 billion all-cash deal. Capco clocked revenues of $700 million in 2020, which would increase Wipro’s BFSI revenue to $3.2 billion from $2.5 billion currently.
Wipro has entered into an agreement to acquire The Capital Markets Company (Capco), an end-to-end management consulting services and digital transformation solutions provider in the banking and financial services space, in a $1.45 billion all-cash deal. Capco clocked revenues of $700 million in 2020, which would increase Wipro’s BFSI revenue to $3.2 billion from $2.5 billion currently. It would also boost Wipro’s consulting and business transformation footprint. Wipro Share price today is Rs 432, down Rs 7 or 1.6%.
Wipro management highlighted that Wipro and Capco share complementary business models, sector alignments and service offering, therefore, the deal would create a unique combination of consulting and domain led expertise with scale, digital technology and operation. As Capco is a focused management technological consultancy offering digital transformational solutions to global financial firms, this deal would enhance Wipro’s offering with integrated and end-to-end consultative digital, cloud and IT transformation solutions at scale to their customers.
See Zee Business Live TV Streaming Below:
Further, the addition of 30 large global financial clients (79% of Capco’s revenue) from the acquisition would significantly enhance Wipro’s access to industry spends as there are significant synergies through cross selling opportunities by leveraging the complementary capabilities of both entities. We believe the unique combination of Capco’s consulting led expertise and Wipro’s technology offerings would help it secure large-scale transformational deals in the BFSI space.
Though Wipro’s management indicated that the acquisition will dilute Wipro IT EBIT margin by 2% in year one as a large component of which will be a non-cash charge (relating to higher charge of intangible assets in earlier years), management would fund the acquisition through cash as the company had a net cash of Rs. 45,234 crore as of Q3FY2021. Wipro highlighted that Capco’s margins are healthy, similar to its own onsite margins.
Wipro’s management also highlighted that Capco’s would improve after the acquisition as it has identified cost synergies. Further, management also highlighted that EPS would be dilutive in the first year and it would turn accretive from third year. Though the progress in consulting business needs to be eyed going ahead, the management has been aggressively looking for ways to boost revenue growth with strategic acquisition, significant people changes and external hires.
Wipro Key Risks:
Rupee appreciation and/or adverse cross-currency movements; longer duration of pandemic; constraint in local talent supply in the US and a stringent visa regime to adversely impact earning.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
IRCTC Dividend 2024: Railway PSU announces 200% interim dividend - Check record date and other details
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
Top 7 Large and Mid Cap Mutual Funds with Best SIP Returns in 5 Years: No. 1 fund has turned Rs 15,000 monthly SIP investment into Rs 20,54,384; know about others
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
09:51 AM IST